<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NOVELLUS SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 3559 77-0024666
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
NOVELLUS SYSTEMS, INC.
4000 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
(408) 943-9700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT H. SMITH
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
NOVELLUS SYSTEMS, INC.
4000 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
(408) 943-9700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
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WILLIAM D. SHERMAN, ESQ. TIMOTHY R. CURRY, ESQ.
RICHARD SCUDELLARI, ESQ. ROD J. HOWARD, ESQ.
STEPHANIE J. MILLET, ESQ. FREDERIC LEVENSON, ESQ.
MARY ANNE BECKING, ESQ. COLBY GARTIN, ESQ.
MORRISON & FOERSTER LLP BROBECK, PHLEGER & HARRISON LLP
755 PAGE MILL ROAD TWO EMBARCADERO PLACE, 2200 GENG ROAD
PALO ALTO, CALIFORNIA 94304-1018 PALO ALTO, CA 94303
(650) 813-5600 (650) 424-0160
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the merger described herein.
------------------------
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common stock, no par value............. 9,750,589 $15.50 $290,642,546 $76,729.63
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(1) Based upon the maximum number of shares of common stock, no par value per
share, of Novellus Systems, Inc., that may be issued pursuant to the merger,
calculated as the product of (a) 18,751,132, the aggregate number of shares
of GaSonics International Corporation's common stock, $0.001 par value per
share, outstanding on October 25, 2000 or issuable pursuant to outstanding
options prior to the date the merger is expected to be consummated and (b)
an exchange ratio of 0.52 of a share of Novellus Systems, Inc. common stock
for each share of GaSonics International Corporation's common stock.
(2) Estimated solely for purposes of calculating the registration fee required
by the Securities Act of 1933, as amended, and computed pursuant to Rules
457(f) and (c) under the Securities Act based on $15.50, the average of the
high and low per share prices of common stock of GaSonics International
Corporation on The Nasdaq National Market on November 13, 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. NOVELLUS SYSTEMS, INC. MAY NOT ISSUE THE COMMON STOCK TO BE
ISSUED IN CONNECTION WITH THE MERGER DESCRIBED IN THIS PROXY
STATEMENT-PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SUBJECT TO COMPLETION, DATED DECEMBER , 2000
[GASONICS LOGO]
TO THE STOCKHOLDERS OF GASONICS INTERNATIONAL CORPORATION
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
Dear GaSonics International Corporation Stockholders:
On October 25, 2000, the board of directors of GaSonics International
Corporation approved an agreement to merge GaSonics with a newly-formed,
wholly-owned subsidiary of Novellus Systems, Inc. as a result of which GaSonics
would become a wholly-owned subsidiary of Novellus.
In the merger, each share of GaSonics common stock will be exchanged for
0.52 of a share of Novellus common stock. Novellus common stock is listed on the
Nasdaq National Market under the trading symbol "NVLS," and on December 7, 2000,
Novellus common stock closed at $ per share. Based on the number of shares
of common stock of GaSonics and Novellus outstanding on December 7, 2000, the
former stockholders of GaSonics will own approximately 6% of Novellus' common
stock after the merger.
Novellus and GaSonics cannot complete the merger unless the stockholders
holding a majority of the outstanding shares of GaSonics adopt the
reorganization agreement. YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN
TO ATTEND YOUR STOCKHOLDERS' MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE. Returning
the proxy does not deprive you of your right to attend the meeting and to vote
your shares in person.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF GASONICS HAS
DETERMINED THAT THE MERGER IS CONSISTENT WITH AND IN FURTHERANCE OF THE
LONG-TERM BUSINESS STRATEGY OF GASONICS, THAT THE MERGER AND THE REORGANIZATION
AGREEMENT ARE IN THE BEST INTERESTS OF GASONICS AND ITS STOCKHOLDERS, THE TERMS
OF THE REORGANIZATION AGREEMENT AND THE MERGER ARE FAIR TO GASONICS
STOCKHOLDERS, HAVE DECLARED THE MERGER ADVISABLE AND APPROVED THE REORGANIZATION
AGREEMENT.
This proxy statement-prospectus provides you with information concerning
Novellus and the merger. Please give all of the information contained in the
proxy statement-prospectus your careful attention; investment in Novellus common
stock involves risk. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION
IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE 20 OF THIS PROXY
STATEMENT-PROSPECTUS.
GaSonics appreciates your interest in and consideration of this matter.
Sincerely,
--------------------------------------
Asuri Raghavan
President and Chief Executive Officer
GaSonics International Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF NOVELLUS COMMON STOCK TO BE
ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED WHETHER THE ACCOMPANYING
PROXY STATEMENT-PROSPECTUS IS ADEQUATE OR ACCURATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The accompanying proxy statement-prospectus is dated December , 2000 and
was first mailed to stockholders on or about December , 2000.
<PAGE> 3
[GASONICS LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
DECEMBER , 2000
------------------------
To the Stockholders of Gasonics International Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of GaSonics
International Corporation, a Delaware corporation, will be held on ,
at 9:00 a.m., Pacific Standard Time, at the offices of GaSonics located at 2730
Junction Avenue, San Jose, California 95134-1909, for the following purposes, as
more fully described in the proxy statement accompanying this Notice:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Reorganization, dated as of October 25, 2000, by and among Novellus
Systems, Inc., Neptune Acquisition-Sub, Inc., a wholly-owned subsidiary of
Novellus Systems, Inc., and GaSonics International Corporation (see Annex
A). Under the reorganization agreement, Neptune Acquisition-Sub will merge
with and into GaSonics International Corporation, and GaSonics
International Corporation will survive the merger as a wholly-owned
subsidiary of Novellus. In the merger, holders of outstanding shares of
common stock of GaSonics will receive 0.52 of a share of Novellus common
stock for each share of GaSonics common stock. Adoption of the
reorganization agreement will also constitute approval of the merger and
the other transactions contemplated by the reorganization agreement.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on December 7, 2000
are entitled to notice of and to vote at the Special Meeting. The stock transfer
books will not be closed between the record date and the date of the meeting. A
list of stockholders entitled to vote at the Special Meeting will be available
for inspection at the executive offices of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Special Meeting. If you attend the Special Meeting and vote by ballot, your
proxy will be revoked automatically and only your vote at the Special Meeting
will be counted.
Sincerely,
------------------------------------------
Dave Toole
Chairman of the Board of Directors
San Jose, California
December , 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iii
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS................... 1
The Companies............................................. 1
Summary of the Transaction................................ 2
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
GASONICS.................................................. 8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
NOVELLUS.................................................. 9
RECENT FINANCIAL DEVELOPMENTS............................... 10
COMPARATIVE PER SHARE DATA.................................. 11
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 13
Novellus Market Price Information......................... 13
GaSonics Market Price Information......................... 13
Recent Closing Prices..................................... 14
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA OF
NOVELLUS AND GASONICS..................................... 15
RISK FACTORS................................................ 20
TRENDS, RISKS AND UNCERTAINTIES RELATING TO THE MERGER...... 20
TRENDS, RISKS AND UNCERTAINTIES RELATING TO NOVELLUS........ 22
TRENDS, RISKS AND UNCERTAINTIES RELATING TO GASONICS........ 31
FORWARD LOOKING STATEMENTS.................................. 39
THE SPECIAL MEETING OF GASONICS STOCKHOLDERS................ 40
Purpose of the Special Meeting............................ 40
Date, Time and Place; Stockholder Record Date for the
Special Meeting........................................ 40
Vote of GaSonics Stockholders Required for Adoption of the
Reorganization Agreement............................... 40
Proxies................................................... 40
Solicitation of Proxies................................... 41
Board Recommendation...................................... 41
THE MERGER.................................................. 43
Background of the Merger.................................. 43
Reasons for the Transaction............................... 46
Recommendation of GaSonics' Board of Directors............ 47
Consideration of the Merger by GaSonics' Board of
Directors.............................................. 47
Opinion of GaSonics' Financial Advisor.................... 50
Interests of Directors and Executive Officers of GaSonics
in the Merger.......................................... 57
Completion and Effectiveness of the Merger................ 58
Structure of the Merger and Conversion of GaSonics Common
Stock.................................................. 58
Exchange of GaSonics Stock Certificates for Novellus Stock
Certificates........................................... 59
Material United States Federal Income Tax Consequences of
the Merger............................................. 59
Accounting Treatment of the Merger........................ 61
Regulatory Filings and Approvals Required to Complete the
Merger................................................. 61
Restrictions on Sales of Shares by Affiliates of GaSonics
and Novellus........................................... 61
Listing on The Nasdaq National Market of Novellus Common
Stock to be Issued in the Merger....................... 62
No Appraisal Rights....................................... 62
Dividend Policy........................................... 62
THE REORGANIZATION AGREEMENT................................ 63
The Merger................................................ 63
Closing and Effective Time of the Merger.................. 63
Conversion of Securities.................................. 63
Representations and Warranties............................ 63
GaSonics' Conduct of Business Before Completion of the
Merger................................................. 65
Restrictions On Other Negotiations Involving GaSonics..... 67
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i
<PAGE> 5
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Recommendation of the Board of Directors.................. 68
GaSonics Employee Benefit Plans........................... 69
Treatment of GaSonics Stock Options....................... 69
Indemnification and Directors and Officers Insurance...... 69
Consents and Antitrust Filings............................ 69
Conditions to Completion of the Merger.................... 70
Termination of the Reorganization Agreement............... 71
Expenses; Payment of Termination Fees..................... 72
Extension, Waiver and Amendment........................... 73
Affiliates Agreements and Restrictions on the Ability to
Sell Novellus Stock.................................... 73
Operations After the Merger............................... 74
COMPARISON OF RIGHTS OF HOLDERS OF GASONICS COMMON STOCK AND
NOVELLUS COMMON STOCK..................................... 75
Director Nominations and Stockholder Proposals............ 75
Amendment to Governing Documents.......................... 75
Cumulative Voting......................................... 76
Appraisal Rights.......................................... 77
Derivative Action......................................... 77
Stockholder Consent in Lieu of Meeting.................... 77
Fiduciary Duties of Directors............................. 78
Indemnification........................................... 78
Director Liability........................................ 79
Anti-Takeover Provisions and Interested
Stockholder/Shareholder Transactions................... 79
Advance Notice of Record Date............................. 80
Inspection of Books and Records........................... 81
Size of the Board of Directors............................ 81
Removal of Directors...................................... 81
Transactions Involving Directors.......................... 82
Filling Vacancies on the Board of Directors............... 82
Inspection of Stockholders List........................... 82
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND
DIRECTORS OF GASONICS..................................... 83
LEGAL MATTERS............................................... 84
EXPERTS..................................................... 84
WHERE YOU CAN FIND MORE INFORMATION......................... 85
ANNEX A -- AGREEMENT AND PLAN OF REORGANIZATION............. A-1
ANNEX B -- OPINION OF BANC OF AMERICA SECURITIES LLC........ B-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHO IS NOVELLUS?
A: Novellus Systems, Inc., or Novellus, is a leading supplier of high
productivity deposition systems used in the fabrication of integrated
circuits. Novellus principally supplies chemical vapor deposition (CVD)
systems which employ a chemical plasma to deposit all of the dielectric
(insulating) layers and certain of the conductive metal layers on the surface
of a semiconductor wafer; physical vapor deposition (PVD) systems which are
used to deposit conductive metal layers by sputtering metallic atoms from the
surface of a target source via high DC power; and electrofill systems which
are used for depositing copper conductive layers in a dual damascene design
architecture using an aqueous solution. Novellus' growth strategy focuses on
major semiconductor manufacturers, and Novellus has sold one or more of its
deposition systems to each of the 20 largest semiconductor manufacturers in
the world. Novellus is traded on The Nasdaq National Market under the symbol
"NVLS."
Q: WHY ARE NOVELLUS AND GASONICS PROPOSING THE MERGER?
A: Novellus and GaSonics are proposing the merger because it is anticipated that
the combined company will have a greater advantage in offering semiconductor
manufacturers comprehensive product lines that optimize overall semiconductor
performance. Specifically, Novellus and GaSonics are proposing the merger for
the following reasons, as well as others described in this proxy
statement-prospectus:
- The merger is expected to enhance product offerings to customers by
combining GaSonics' surface preparation product line with Novellus'
deposition system product line.
- The merger is expected to enable the combined company to more effectively
innovate and rapidly bring products to market.
- The merger is expected to allow the combined company to respond to
changes in semiconductor technology and the needs of semiconductor
manufacturers through a combination of Novellus' engineering resources
and GaSonics' depth of knowledge and market leadership in surface
preparation.
- The merger is expected to provide the combined company with the
opportunity to interactively optimize surface preparation and deposition
steps in semiconductor manufacturing to increase overall device
performance and to give the combined company an advantage in extending
copper and low-k processes to advanced semiconductor devices.
In addition, GaSonics believes that the merger will provide GaSonics
stockholders with greater stockholder value both in the short-term and in the
long-term (see section entitled "The Merger -- Consideration of The Merger By
GaSonics' Board of Directors" on page 47).
Q: WHAT WILL GASONICS STOCKHOLDERS RECEIVE FOR THEIR GASONICS SHARES?
A: GaSonics stockholders will receive 0.52 of a share of Novellus common stock
in exchange for each of their shares of GaSonics common stock. Novellus will
not issue fractional shares in the merger. Instead of a fraction of a share,
GaSonics stockholders will receive an amount of cash, without interest, equal
to the product of (x) such fraction, multiplied by (y) the average closing
price per share of Novellus' common stock as quoted on The Nasdaq National
Market for the 20 trading days ending on the day which is two trading days
before the closing of the merger, less any amounts required to be withheld
under foreign, federal, state or local tax laws.
Q: WHEN WILL THE MERGER OCCUR?
A: The merger will occur after approval of the GaSonics stockholders is obtained
and the other conditions to the merger, including regulatory approvals, are
satisfied or waived. Novellus and GaSonics are working towards completing the
merger as quickly as reasonably possible.
iii
<PAGE> 7
Q: DO NOVELLUS OR GASONICS HAVE THE RIGHT TO TERMINATE THE REORGANIZATION
AGREEMENT BASED UPON THEIR STOCK PRICES?
A: No. The exchange ratio is fixed at 0.52 and neither Novellus nor GaSonics has
the right to "walk-away" from the transaction if its or the other party's
stock price increases or decreases.
Q: HOW WILL THE MERGER AFFECT GASONICS STOCK OPTIONS?
A: Options to purchase shares of GaSonics common stock will be assumed by
Novellus and become exercisable for shares of Novellus common stock after the
merger. The number of shares covered by these options, and their applicable
exercise prices, will be adjusted using the merger exchange ratio of 0.52 of
a share of Novellus common stock for each share of GaSonics common stock that
was subject to the applicable option prior to the merger (subject to
adjustment to reflect the effect of any stock split, stock dividend,
recapitalization, reclassification or the like on GaSonics or Novellus common
stock).
Q: WILL GASONICS STOCKHOLDERS BE ABLE TO TRADE THE NOVELLUS STOCK THEY RECEIVE
IN THE MERGER?
A: Yes. The Novellus common stock will be listed on The Nasdaq Stock Market
under the symbol "NVLS." Certain persons who are deemed affiliates of
GaSonics will be required to comply with Rule 145 under the Securities Act
and the terms of their affiliates agreements with Novellus if they sell their
shares of Novellus common stock received in the merger. In addition, in
connection with accounting for the merger as a pooling-of-interests,
GaSonics' affiliates will not be able to sell their shares of Novellus common
stock received in the merger until Novellus releases earnings containing at
least 30 days of earnings of the combined company.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. Under applicable law, you are not entitled to dissenters' or appraisal
rights in connection with the merger.
Q: ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE MERGER?
A: Yes. We have set out in the section entitled "Risk Factors" beginning on page
20 of this document a number of risk factors that you should consider in
connection with the merger.
Q: HOW WILL GASONICS FIT INTO NOVELLUS AFTER THE MERGER?
A: Following the merger, GaSonics will operate as a wholly-owned subsidiary of
Novellus. The employees of GaSonics will become employees of the surviving
corporation or of Novellus.
Q: WHAT DO I NEED TO DO NOW?
A: Following your review of this proxy statement-prospectus, mail your signed
proxy card in the enclosed return envelope as soon as possible so that your
shares can be voted at the special meeting of GaSonics stockholders.
Q: HOW DO I VOTE ON THE MERGER?
A: Following your review of this document, complete and sign the enclosed proxy
card, and then mail it in the enclosed return envelope as soon as possible so
that your shares can be voted at the special meeting of GaSonics stockholders
at which the reorganization agreement and the merger will be presented and
voted upon. You may also attend the special meeting in person and vote at the
special meeting instead of submitting a proxy.
iv
<PAGE> 8
Q: WHAT HAPPENS IF I RETURN MY PROXY CARD BUT DON'T INDICATE HOW TO VOTE?
A: If you sign your proxy properly but do not include instructions on how to
vote, your GaSonics shares will be voted FOR adoption of the reorganization
agreement.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD AT ALL?
A: Not returning your proxy card will have the same effect as voting against
adoption of the reorganization agreement and against approval of the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice to GaSonics stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy card. Third, you can attend
the special meeting and vote in person.
Q: IF MY BROKER HOLDS MY SHARES IN STREET NAME, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Novellus will send GaSonics stockholders
written instructions for exchanging their GaSonics stock certificates for new
Novellus stock certificates.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You can write or call GaSonics' Investor Relations at 404 East Plumeria
Drive, San Jose, CA 95134-1912, telephone (408) 570-7400 with any questions
about the merger, the reorganization agreement and the special meeting.
v
<PAGE> 9
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS
This summary may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents to
which the summary refers, including the documents attached as annexes to this
proxy statement-prospectus, for a more complete understanding of the merger. In
addition, the proxy statement-prospectus incorporates by reference important
business and financial information about Novellus and GaSonics. You may obtain
the information incorporated by reference into this proxy statement-prospectus
without charge by following the instructions in the section entitled "Where You
Can Find More Information" on page 85 of this proxy statement-prospectus.
THE COMPANIES.
GASONICS INTERNATIONAL CORPORATION
404 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
ATTN: INVESTOR RELATIONS
(408) 570-7400
GaSonics is a leading developer and global supplier of photoresist removal
and Integrated Clean solutions used in advanced semiconductor device
manufacturing. GaSonics' versatile Integrated Clean solutions, which combine
photoresist removal and residue removal technologies within a single platform,
allow its customers to integrate manufacturing process steps, increasing their
yields and throughput. GaSonics also provides low pressure chemical vapor
deposition, or LPCVD, systems for the flat panel display, or FPD, industry.
GaSonics markets and sells its products to leading semiconductor device and FPD
manufacturers worldwide.
The manufacturing of semiconductor devices requires a large number of
complex and repetitive processing steps to layer different materials and imprint
various features on a single wafer. Photoresist removal and residue removal are
used to clean the wafer between these processing steps. As semiconductor devices
are becoming more advanced, there are a number of trends increasing the demand
for complex photoresist removal and residue removal solutions, which include the
following:
- manufacturing these advanced semiconductor devices requires an increasing
number of photolithographic masking layers and corresponding photoresist
removal and residue removal steps;
- line geometries, or feature sizes, of semiconductor devices continue to
decrease, increasing the complexity and difficulty of photoresist removal
and residue removal; and
- new processes and materials, including dual damascene, copper and low-k
dielectrics, are complicating preparation of the wafer surface and
therefore complicating photoresist removal and residue removal for
subsequent masking steps.
As a result, GaSonics believes the market for cleaning solutions will grow more
rapidly than the semiconductor industry and the semiconductor capital equipment
industry.
GaSonics' photoresist removal systems use its innovative microwave
downstream plasma technology, which is designed to increase yields in the
manufacturing of semiconductor devices. This technology offers GaSonics'
customers significant advantages over traditional techniques by reducing the
damage that typically occurs to the wafer in the photoresist removal processes,
thus increasing yields and reducing cost of ownership. Moreover, GaSonics'
technologically advanced systems offer a high degree of flexibility, reliability
and serviceability.
GaSonics' Integrated Clean systems use its microwave downstream plasma
technology in concert with directional RF plasma technology to remove
photoresist and more difficult to remove residues. These systems allow GaSonics'
customers to achieve greater fab efficiency and reduced costs by simplifying
process flows. In addition, these systems provide industry leading technology
for the complex cleaning requirements associated with smaller feature sizes as
well as new processes and materials, such as dual damascene, copper and low-k
dielectrics. To further address these new requirements, GaSonics has
1
<PAGE> 10
recently entered into joint development agreements with a number of customers
and semiconductor equipment manufacturers, such as GaSonics' participation in
the Damascus Alliance.
References herein to "GaSonics" refer to GaSonics International Corporation
and its subsidiaries. GaSonics(R) is a registered trademark of GaSonics and
Integrated Clean Performance Enchancement Platform and Iridia are GaSonics
trademarks.
NOVELLUS SYSTEMS, INC.
4000 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
ATTN: INVESTOR RELATIONS
(408) 943-9700
Novellus is a leading supplier of high productivity deposition systems used
in the fabrication of integrated circuits. Deposition is a process in which a
film of either electrically insulating or electrically conductive material is
deposited on the surface of a wafer. The three principal methods of this film
deposition are chemical vapor deposition (CVD), which can be used to deposit
both insulating and conductive films; physical vapor deposition (PVD), which is
used primarily for sputtering conductive metals onto the wafer surface; and
electrofill, a process for depositing metal films via an electrically charged
aqueous solution. Novellus supplies CVD systems, PVD systems and electrofill
systems to semiconductor manufacturers.
Novellus' growth strategy focuses on major semiconductor manufacturers
because the fabrication of integrated circuits by these manufacturers requires a
number of complex and repetitive processing steps, including deposition, and
because advanced integrated circuit technology has created increased demand for
more sophisticated semiconductor processing equipment. For example, today's
complex semiconductor devices are being designed with line width geometries as
small as 0.25 micron, with up to six layers of interconnect circuitry. The next
generation of semiconductor devices, including 256 megabit DRAMs, may have line
widths as small as 0.18 micron. Each additional interconnect layer requires
three separate layers of deposition, which include the initial metal layer, a
non-conductive dielectric layer and then a "plug" metal film to fill patterned
holes in the dielectric layer that connects the metal layers on either side of
the dielectric layer. Novellus believes that the greater complexity and number
of interconnect layers in advanced integrated circuits will enable the markets
for CVD aluminum and PVD aluminum to grow over the short term. Additionally, the
continuing evolution of semiconductor devices to smaller line width geometries
and more complex multi-level circuitry has significantly increased the cost and
performance requirements of the capital equipment used to manufacture these
devices. Increased capital depreciation costs will continue to become a much
larger percentage of the aggregate production costs for semiconductor
manufacturers relative to labor, materials and other variable manufacturing
costs. As a result, there has been an increasing focus by the semiconductor
industry on obtaining increased productivity and higher returns from its
semiconductor manufacturing equipment, thereby reducing the effective cost of
ownership of such systems. Novellus' product offerings aim to address these
concerns of semiconductor manufacturers.
Novellus was incorporated in California in 1984. References herein to
"Novellus" refer to Novellus Systems, Inc. and its subsidiaries. Novellus'
headquarters are located at 4000 North First Street, San Jose, California 95134,
and Novellus' telephone number is (408) 943-9700.
SUMMARY OF THE TRANSACTION.
STRUCTURE OF THE TRANSACTION.
Neptune Acquisition-Sub, Inc., a wholly-owned subsidiary of Novellus, will
merge with and into GaSonics with GaSonics then becoming a wholly-owned
subsidiary of Novellus. Following the merger, GaSonics' current stockholders
will own common stock in GaSonics' parent company, Novellus.
2
<PAGE> 11
VOTE OF GASONICS STOCKHOLDERS (SEE PAGE 40).
To approve the merger, the holders of a majority of the outstanding shares
of GaSonics common stock must adopt the reorganization agreement. Novellus
shareholders are not required to vote on the reorganization agreement and will
not vote on the merger.
GaSonics stockholders are entitled to cast one vote for each share of
GaSonics common stock they owned as of December 7, 2000, the record date for the
special meeting of stockholders of GaSonics.
The directors, officers and affiliates of GaSonics collectively
beneficially owned approximately % of the outstanding GaSonics common stock
as of December 7, 2000.
Holders of GaSonics' common stock, who on December 7, 2000 collectively
beneficially held approximately shares of GaSonics voting stock
and % of the outstanding voting power of GaSonics, have already agreed to
vote in favor of the reorganization agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GASONICS (SEE PAGE 47).
After careful consideration, the board of directors of GaSonics determined
that the merger is consistent with and in furtherance of the long-term business
strategy of GaSonics, determined that the merger and the reorganization
agreement are in the best interests of GaSonics and its stockholders, determined
that the terms of the reorganization agreement and the merger are fair to
GaSonics stockholders, declared the merger advisable and approved the
reorganization agreement.
THE GASONICS BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF GASONICS
STOCK APPROVE AND ADOPT THE REORGANIZATION AGREEMENT AND APPROVE THE MERGER IN
ACCORDANCE THEREOF.
OPINION OF GASONICS FINANCIAL ADVISOR (SEE PAGE 50).
At the meeting of the board of directors of GaSonics on October 25, 2000,
Banc of America Securities delivered its oral opinion to the board of directors,
subsequently confirmed in writing, that, as of such date, the exchange ratio in
the merger was fair from a financial point of view to the holders of GaSonics
common stock. The full text of the written opinion of Banc of America Securities
which sets forth the assumptions made, matters considered and limits on review
undertaken, has been attached as Annex B to this proxy statement-prospectus. You
are encouraged to read this opinion carefully in its entirety. The opinion of
Banc of America Securities is addressed to the GaSonics board of directors and
relates only to the fairness, from a financial point of view, of the exchange
ratio to the holders of GaSonics common stock. The opinion does not address any
other aspects of the proposed merger and does not constitute an opinion or
recommendation to any stockholder of GaSonics as to how such stockholder should
vote at the special meeting.
PROCEDURE FOR EXCHANGING YOUR GASONICS STOCK CERTIFICATES (SEE PAGE 59).
After the merger is completed, Novellus will send GaSonics stockholders
written instructions for exchanging their GaSonics stock certificates for new
Novellus stock certificates. DO NOT SEND YOUR GASONICS STOCK CERTIFICATES NOW.
COMPLETION AND EFFECTIVENESS OF THE MERGER.
Novellus and GaSonics will complete the merger when all of the conditions
to completion of the merger are satisfied or, if permitted by law, waived. The
merger will become effective when a certificate of merger is filed with the
State of Delaware. Novellus and GaSonics are working toward completing the
merger as quickly as reasonably possible.
3
<PAGE> 12
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 70).
Novellus' and GaSonics' obligations to complete the merger are subject to
certain conditions. The conditions that must be satisfied or, if permitted by
law, waived before the completion of the merger include the following:
- the registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, must become effective, no stop order
may be in effect and no proceedings by the Securities and Exchange
Commission for suspension of its effectiveness may be pending;
- the reorganization agreement must be adopted by the affirmative vote of
the holders of a majority of the outstanding shares of GaSonics common
stock;
- no law, rule, regulation, judgment, decree, injunction, executive order
or award may be in effect which would have the effect of making the
merger illegal or otherwise prohibiting completion of the merger;
- the waiting period, and any extensions, applicable to the completion of
the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or under any other foreign antitrust or combination law and any material
filing, comment, approval or authorization legally required must either
have expired, been terminated or been obtained; and
- legal opinions regarding the treatment of the merger as a tax-free
reorganization must be received by Novellus and GaSonics.
GaSonics' obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- Novellus' representations and warranties must be materially true and
correct, except where the failure to be so true and correct has not had a
material adverse effect on Novellus;
- Novellus shall have performed or complied in all material respects with
all of its agreements and covenants to be performed or complied with by
it at or before completion of the merger; and
- GaSonics shall have received a letter from its independent accountants
that GaSonics is poolable in connection with the treatment of the merger
as a pooling-of-interests.
Novellus' obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- GaSonics' representations and warranties must be materially true and
correct, except where the failure to be true and correct has not had a
material adverse effect on GaSonics;
- GaSonics shall have performed or complied in all material respects with
all of its agreements and covenants to be performed or complied with by
it at or before completion of the merger;
- Novellus shall have received a letter from its independent accountants
that the merger will qualify for pooling-of-interests accounting
treatment;
- Novellus shall have received an affiliates letter from each GaSonics
affiliate; and
- GaSonics' fees with respect to legal, accounting and financial advisors
shall not have exceeded certain amounts set forth in the reorganization
agreement.
RESTRICTIONS ON OTHER NEGOTIATIONS INVOLVING GASONICS (SEE PAGE 67).
GaSonics has agreed, subject to specified exceptions, not to initiate or
engage in discussions with any other party which has made, or has advised
GaSonics in writing that it intends to make, a takeover proposal about a
business combination with any other party while the merger is pending.
4
<PAGE> 13
TERMINATION OF THE REORGANIZATION AGREEMENT (SEE PAGE 71).
Novellus and GaSonics can mutually agree in writing to terminate the
reorganization agreement without completing the merger and either Novellus or
GaSonics can terminate the reorganization agreement upon the occurrence of
several events, including:
- if the merger is not completed before April 25, 2001, which date may be
extended by the mutual written consent of Novellus and GaSonics;
- if any permanent injunction or other order of a court preventing the
merger shall become final and nonappealable;
- if GaSonics' stockholders do not adopt the reorganization agreement at a
special meeting of the GaSonics shareholders; or
- if the other party materially breaches any representation, warranty,
obligation or agreement under the reorganization agreement (other than a
breach which has not had, and would not reasonably be expected to result
in, a material adverse effect on the party) and the breach is not cured
within 20 business days of written notice of the breach.
Additionally, Novellus may terminate the reorganization agreement upon the
occurrence of several other events, including:
- GaSonics' board of directors withdraws or modifies its recommendation of
the merger in a manner adverse to Novellus or recommends, endorses,
accepts or agrees to an alternative transaction meeting the requirements
set forth in the reorganization agreement or a tender or exchange offer
for 30% or more of the outstanding shares of GaSonics, or rejects the
alternative transaction or tender offer, but fails to give Novellus a
written reaffirmation of its recommendation of the merger within five
business days following the rejection of such alternative proposal or
tender offer; or
- GaSonics or any of its subsidiaries or their respective officers,
directors, employees or representatives materially breach or violate the
no solicitation restrictions set forth in Section 4.3(a) of the
reorganization agreement.
Furthermore, GaSonics may terminate the reorganization agreement if
GaSonics' board of directors recommends, endorses, accepts or agrees to an
alternative transaction which is superior to the merger.
PAYMENT OF TERMINATION FEES (SEE PAGE 72).
GaSonics must pay Novellus a termination fee equal to 3% of the average
closing price of Novellus common stock for the 20-day period ending on the day
one day prior to the termination date that would have been issued in the merger
as of the date of termination of the reorganization agreement upon the
occurrence of a number of events, including:
- GaSonics' board of directors withdraws or modifies its recommendation of
the merger in a manner adverse to Novellus or recommends, endorses,
accepts or agrees to (x) an alternative transaction meeting the
requirements set forth in the reorganization agreement, (y) a tender or
exchange offer for 30% or more of the outstanding shares of GaSonics, or
(z) an alternative transaction which is superior to the merger; or
GaSonics' board of directors rejects the alternative transaction or
tender offer but fails to give Novellus a written reaffirmation of its
recommendation of the merger within five business days following the
rejection of such alternative proposal or tender offer; or
- GaSonics or any of its subsidiaries or their respective officers,
directors, employees or representatives materially breach or violate the
no solicitation restrictions set forth in Section 4.3(a) of the
reorganization agreement.
Additionally, both GaSonics and Novellus must promptly reimburse the other
party for all of the actual, documented, reasonable out-of-pocket costs and
expenses incurred by the other party in connection with the reorganization
agreement if the reorganization agreement is terminated by either Novellus or
5
<PAGE> 14
GaSonics because (x) the other party materially breaches any representation,
warranty, obligation or agreement under the reorganization agreement (other than
a breach which has not had, and would not reasonably be expected to result in, a
material adverse effect on such party) and the breach is not cured within 20
business days of written notice of the breach; or (y) GaSonics' or Novellus'
independent accountants determine that such party is not poolable in connection
with the treatment of the merger as a pooling-of-interests.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS OF GASONICS IN THE MERGER (SEE
PAGE 57).
When considering the recommendation of GaSonics' board of directors, you
should be aware that some GaSonics directors and executive officers have
interests in the merger that are different from, or are in addition to, your
interests.
Some of the directors and officers of GaSonics may participate in
employment agreements and other arrangements and have continuing indemnification
against liabilities that provide them with interests in the merger that are
different from, or are in addition to, your interests. The members of the
GaSonics board of directors knew about these additional interests, and
considered them, when they approved the merger and the reorganization agreement.
As a result of these interests, these directors and officers may be more
likely to vote to adopt the reorganization agreement and approve the merger than
if they did not hold these interests. You should consider whether these
interests may have influenced these directors and officers to support or
recommend the merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE
59).
The merger is structured so that, in general, GaSonics' stockholders will
not recognize gain or loss for United States federal income tax purposes upon
the merger, except for taxes payable because of cash received by GaSonics
stockholders instead of fractional shares. It is a condition to the merger that
Novellus and GaSonics receive legal opinions stating that the merger will
qualify as a tax-free reorganization.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 61).
The merger will be accounted for under the pooling-of-interests method of
accounting in accordance with generally accepted accounting principles. It is a
condition to the merger that Novellus receive a letter from its independent
accountants stating that the merger will qualify for pooling-of-interests
accounting treatment and that GaSonics receive a letter from its independent
accountants stating that it is poolable in connection with the merger.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER (SEE PAGE 61).
The merger is subject to approval under the antitrust laws. Novellus and
GaSonics have made the required filings with the United States Department of
Justice and the United States Federal Trade Commission, but the appropriate
waiting periods have not expired as of the date of this proxy statement-
prospectus. Novellus and GaSonics will also make any required filings with
foreign regulatory agencies or governmental entities, if necessary and
applicable. Novellus and GaSonics are not permitted to complete the merger until
all applicable waiting periods have expired or terminated. Novellus and GaSonics
intend to comply with all requests for information from the United States
Department of Justice or the United States Federal Trade Commission or any
applicable foreign regulatory agency or governmental entity. The United States
Department of Justice or the United States Federal Trade Commission, as well as
a foreign regulatory agency or government, state or private person, may
challenge the merger at any time before or after its completion.
6
<PAGE> 15
AFFILIATES AGREEMENTS AND RESTRICTIONS ON THE ABILITY TO SELL NOVELLUS STOCK
(SEE PAGE 73).
The parties will use commercially reasonable efforts to have all affiliates
of GaSonics and Novellus execute affiliates agreements prior to closing. Under
the GaSonics affiliates agreements, Novellus will be entitled to place
appropriate legends on the certificates evidencing any Novellus common stock to
be received by affiliates of GaSonics. In addition, affiliates of GaSonics have
also acknowledged the resale restrictions imposed by Rule 145 under the
Securities Act of 1933, as amended, on shares of Novellus common stock to be
received by them in the merger. Shares of Novellus common stock held by
affiliates of Novellus may only be sold pursuant to a registration statement or
exemption under the Securities Act or as permitted under the rules of the
Securities Act.
Further, in connection with the accounting for the merger as a
pooling-of-interests, both GaSonics and Novellus affiliates agree in their
respective affiliates agreements that they will not, within the 30 days
preceding the effective time of the merger, sell, transfer or otherwise dispose
of or reduce their risk relative to any shares of Novellus common stock
beneficially owned by them or transfer any Novellus common stock received by
them in the merger until after such time as financial results covering at least
30 days of combined operations of Novellus and GaSonics have been published by
Novellus.
All shares of Novellus common stock received by a GaSonics stockholder in
connection with the merger will be freely transferable unless the stockholder is
considered an affiliate of either Novellus or GaSonics under the federal
securities laws.
NO APPRAISAL RIGHTS (SEE PAGE 62).
Under applicable law, the GaSonics stockholders are not entitled to
dissenters' or appraisal rights in connection with the merger.
EXPENSES.
Except for the termination fees payable by Novellus and GaSonics in certain
circumstances, each party has agreed to pay all expenses it incurs in connection
with the merger, whether or not the merger is completed.
7
<PAGE> 16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GASONICS
Set forth below is a summary of certain consolidated financial information
with respect to GaSonics as of the dates and for the periods indicated. The
consolidated statement of operations and other data set forth below for the
fiscal years ended September 30, 1999, 1998, and 1997 and the consolidated
balance sheet data as of September 30, 1999 and 1998 have been derived from
GaSonics' consolidated financial statements which have been audited by Arthur
Andersen LLP and are incorporated in this proxy statement-prospectus by
reference. The consolidated statement of operations data and other data set
forth below for the fiscal years ended September 30, 1996 and 1995 and the
consolidated balance sheet data as of September 30, 1997, 1996, and 1995 have
been derived from GaSonics' consolidated financial statements which have been
audited by Arthur Andersen LLP and are not incorporated in this proxy
statement-prospectus by reference. The selected historical financial data of
GaSonics as of and for the nine months ended June 30, 2000 and June 30, 1999 has
been derived from GaSonics' unaudited financial which are incorporated in this
proxy statement-prospectus by reference. The selected unaudited interim
consolidated financial data includes, in the opinion of GaSonics' management,
all adjustments, consisting of normal recurring adjustments, which GaSonics
considers necessary to present fairly the results of operations and financial
position of such periods.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) NINE MONTHS ENDED
FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales..................................... $102,047 $127,043 $121,256 $100,430 $ 64,279 $ 41,139 $103,171
Cost of sales................................. 44,117 64,417 67,292 59,126 39,894 26,808 56,584
-------- -------- -------- -------- -------- -------- --------
Gross margin.................................. 57,930 62,626 53,964 41,304 24,385 14,331 46,587
Operating expenses:
Research and development.................... 12,346 18,006 17,410 20,493 17,696 13,449 14,357
Selling, general and administrative......... 25,067 32,250 29,257 28,727 21,639 15,893 21,358
Special charges............................. 575 -- 4,517 1,681 407 407
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.................. 37,988 50,256 51,184 50,901 39,742 29,749 35,715
Operating income (loss)....................... 19,942 12,370 2,780 (9,597) (15,357) (15,418) 10,872
Interest and other income, net................ 1,085 1,225 631 1,070 1,275 939 1,395
Gain on sale of investment.................... 4,700 143 1,215 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income tax provision
(benefit)................................... 25,727 13,738 4,626 (8,527) (14,082) (14,479) 12,267
Income tax provisions (benefit)............... 9,601 4,808 1,619 (2,814) -- -- (753)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................. $ 16,126 $ 8,930 $ 3,007 $ (5,713) $(14,082) $(14,479) $ 11,514
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share:
Basic....................................... $ 1.26 $ 0.67 $ 0.22 $ (0.41) $ (0.98) $ (1.01) $ 0.78
Diluted..................................... $ 1.23 $ 0.65 $ 0.21 $ (0.41) $ (0.98) $ (1.01) $ 0.72
Number of shares used in computing net income
(loss) per share amounts:
Basic....................................... 12,798 13,328 13,635 14,039 14,316 14,287 14,824
Diluted..................................... 13,111 13,738 14,209 14,039 14,316 14,287 15,924
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, AS OF JUNE 30, 1999
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 ACTUAL
-------- -------- -------- -------- -------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities.................................. $ 36,599 $ 25,909 $ 24,884 $ 32,338 $ 27,757 $28,912
Working capital............................... 55,130 59,224 62,971 59,735 49,575 49,686
Total assets.................................. 85,367 96,430 104,382 97,216 84,208 84,322
Total stockholder's equity.................... 63,188 72,689 79,193 75,408 61,623 62,293
</TABLE>
8
<PAGE> 17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NOVELLUS
Set forth below is a summary of certain consolidated financial information
with respect to Novellus as of the dates and for the periods indicated. The
consolidated statements of operations data set forth below for the fiscal years
ended December 31, 1999, 1998 and 1997 and the consolidated balance sheet data
as of December 31, 1999 and 1998 have been derived from Novellus' consolidated
financial statements which have been audited by Ernst & Young LLP and are
incorporated in this proxy statement-prospectus by reference. The consolidated
statements of operations data set forth below for the fiscal years ended
December 31, 1996 and 1995 and the consolidated balance sheet data as of
December 31, 1997, 1996 and 1995 have been derived from Novellus' consolidated
financial statements which have been audited by Ernst & Young LLP and are not
incorporated in this proxy statement-prospectus by reference. The selected
historical financial data of Novellus as of and for the nine months ended
September 30, 2000 and September 25, 1999 has been derived from Novellus'
unaudited financial statements which are incorporated in this proxy
statement-prospectus by reference. The unaudited selected historical financial
data for the nine months ended September 25, 1999 and September 30, 2000 and as
of September 30, 2000 includes, in the opinion of Novellus' management, all
adjustments, consisting of normal recurring adjustments, which Novellus
considers necessary to present fairly the results of operations and financial
position of such periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------- SEPT. 25, SEPT. 30,
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales.................................. $373,732 $461,736 $534,004 $518,778 $592,741 $401,025 $ 959,156
Gross profit............................... 216,147 264,574 290,438 280,865 321,031 214,437 543,796
Net income (loss).......................... 82,543 94,029 (95,658)* 52,828 76,574 43,597 218,494
Basic earnings (loss) per share**.......... $ 0.84 $ 0.97 $ (0.96) $ 0.52 $ 0.67 $ 0.38 $ 1.74
Diluted earnings (loss) per share**........ $ 0.80 $ 0.95 $ (0.96) $ 0.50 $ 0.64 $ 0.37 $ 1.64
Shares used in basic per share
calculations**........................... 98,136 96,468 99,770 102,106 114,817 113,694 125,308
Shares used in diluted per share
calculations**........................... 102,822 99,054 99,770*** 104,961 120,097 118,704 133,413
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, and short-term
investments.............................. $149,799 $176,668 $ 98,089 $130,818 $385,257 $1,103,448
Working capital............................ 226,257 287,818 223,710 287,621 592,436 1,384,243
Total assets............................... 364,688 459,787 493,300 551,939 909,929 1,846,188
Long-term obligations...................... -- -- 65,000 65,000 -- --
Shareholder's equity....................... 272,782 373,636 301,001 375,465 769,699 1,579,806
Cash dividends per share................... -- -- -- -- -- --
</TABLE>
-------------------------
* Novellus' reported loss of $95.7 million or $0.96 per share for the year
ended December 31, 1997 includes pre-tax one-time charges totaling $235.2
million, consisting of $133.5 million in connection with the acquisition of
TFS, a write-off of $17.7 million in connection with outstanding accounts
receivable from Submicron Technology, Inc. and charges totaling $84.0
million in connection with the May 4, 1997 settlement of the TEOS patent
litigation.
** The earnings (loss) per share amounts and shares used have been adjusted to
reflect Novellus' two-for-one stock split, effective October 1997 and
Novellus' three-for-one stock split, effective January 15, 2000.
*** Excludes common stock equivalents as they are antidilutive to the loss per
share for the year.
9
<PAGE> 18
RECENT FINANCIAL DEVELOPMENTS
On November 1, 2000, GaSonics announced its fourth quarter and year-end
financial results for its fiscal period ending September 30, 2000.
Net income for the fourth quarter ending September 30, 2000 was $2.9
million, or $0.16 per diluted share, on $52.7 million in net sales. Excluding
in-process research and development charges associated with the acquisition of
Gamma Precision Technologies, net income for the quarter was $8.9 million, or
$0.50 per diluted share.
Net income for the fiscal year ending September 30, 2000 was $14.4 million,
or $0.88 per diluted share, on $155.8 million in net sales. Excluding the
in-process research and development charges noted above, net income for the year
was $20.4 million, or $1.24 per diluted share.
10
<PAGE> 19
COMPARATIVE PER SHARE DATA
The following table summarizes historical financial information and
unaudited pro forma combined and equivalent pro forma financial information on a
per share basis.
The unaudited pro forma combined financial information assumes that the
merger was completed at the beginning of each of the periods presented and gives
effect to the merger as a pooling-of-interests for accounting purposes. The
basic and diluted unaudited pro forma combined per share information for
Novellus is based upon the number of outstanding shares of Novellus common stock
adjusted to include the number of Novellus common shares that would be issued in
the merger based on the number of shares of GaSonics common stock outstanding on
the dates reported.
Historical book value per share is computed by dividing shareholders'
equity by the number of shares of common stock outstanding at the end of the
period. Novellus pro forma combined book value per share is computed by dividing
pro forma combined shareholders' equity by the pro forma number of shares of
Novellus common stock outstanding at the end of the period.
For purposes of the pro forma combined per share data, we have combined
Novellus' fiscal years ended December 31, 1997, 1998 and 1999 with GaSonics
fiscal years ended September 30, 1997, 1998 and 1999. For the nine months ended
September 25, 1999 and September 30, 2000, we have combined Novellus' nine
months ended September 25, 1999 and September 30, 2000 with GaSonics' nine
months ended June 30, 1999 and 2000, respectively.
The unaudited equivalent pro forma per share information for GaSonics is
based on the unaudited pro forma combined amounts per share for Novellus
multiplied by the exchange ratio of 0.52.
The information set forth below is qualified in its entirety by reference
to, and should be read in conjunction with, the historical financial information
of Novellus incorporated by reference and GaSonics incorporated by reference
included in this document and the pro forma combined financial information
included in this document.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1997 1998 1999 2000
------ ----- ----- -------------
<S> <C> <C> <C> <C>
HISTORICAL NOVELLUS
Basic net income (loss) per common share............. $(0.96) $0.52 $0.67 $ 1.74
Diluted net income (loss) per common share........... $(0.96) $0.50 $0.64 $ 1.64
Book value per common share.......................... $6.46 $12.03
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS
SEPTEMBER 30, ENDED JUNE 30,
------------------------- --------------
1997 1998 1999 2000
----- ------ ------ --------------
<S> <C> <C> <C> <C>
HISTORICAL GASONICS
Basic and diluted net income (loss) per share....... $0.22 $(0.41) $(0.98) $0.78
Diluted net income (loss) per common share.......... $0.21 $(0.41) $(0.98) $0.72
Book value per common share......................... $ 4.28 $7.34
</TABLE>
11
<PAGE> 20
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, ------------------------------
------------------------- SEPTEMBER 25, SEPTEMBER 30,
1997 1998 1999 1999 2000
------ ----- ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
NOVELLUS PRO FORMA COMBINED
Basic net income (loss) per share...... $(0.87) $0.43 $ 0.56 $ 0.29 $ 1.70
Diluted net income (loss) per share.... $(0.87) $0.42 $ 0.54 $ 0.28 $ 1.60
Book value per common share............ $ 6.62 $12.12
GASONIC EQUIVALENT PRO FORMA COMBINED
Basic net income (loss) per share...... $(0.45) $0.22 $ 0.29 $ 0.15 $ 0.88
Diluted net income (loss) per share.... $(0.45) $0.22 $ 0.28 $ 0.15 $ 0.83
Book value per common share............ $ 3.44 $ 6.30
</TABLE>
12
<PAGE> 21
COMPARATIVE PER SHARE MARKET PRICE DATA
NOVELLUS MARKET PRICE INFORMATION
Novellus common stock is traded on The Nasdaq National Market under the
symbol "NVLS." The following table shows the high and low sale prices of
Novellus common stock as reported by The Nasdaq National Market for the periods
indicated. The prices in the following table have been adjusted to reflect all
previous stock dividends and splits through the date of this proxy
statement-prospectus. Novellus has never paid a cash dividend since its
inception and does not anticipate paying any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
NOVELLUS SALE PRICE
--------------------
HIGH LOW
-------- --------
<S> <C> <C>
Year Ended December 31, 1998
First Quarter............................................. $16.46 $ 9.94
Second Quarter............................................ $16.48 $10.42
Third Quarter............................................. $14.35 $ 7.90
Fourth Quarter............................................ $19.31 $ 7.31
Year Ended December 31, 1999
First Quarter............................................. $25.17 $16.48
Second Quarter............................................ $23.58 $14.96
Third Quarter............................................. $25.29 $17.29
Fourth Quarter............................................ $42.79 $22.29
Year Ended December 31, 2000
First Quarter............................................. $69.94 $39.27
Second Quarter............................................ $66.69 $40.06
Third Quarter............................................. $68.44 $43.88
Fourth Quarter through December 7, 2000................... $ $
</TABLE>
GASONICS MARKET PRICE INFORMATION
GaSonics common stock is traded on The Nasdaq National Market under the
symbol "GSNX." The following table shows the high and low sale prices of
GaSonics common stock as reported by The Nasdaq National Market for the periods
indicated. The prices in the following table have been adjusted to reflect all
previous stock dividends and splits through the date of this proxy
statement-prospectus. GaSonics has never paid a cash dividend since its
inception and does not anticipate paying any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
GASONICS SALE PRICE
--------------------
HIGH LOW
-------- --------
<S> <C> <C>
Year Ended September 30, 1999
First Quarter............................................. $ 9.50 $ 3.56
Second Quarter............................................ $13.75 $ 7.88
Third Quarter............................................. $15.06 $10.88
Fourth Quarter............................................ $17.56 $13.00
Year Ended September 30, 2000
First Quarter............................................. $19.75 $14.19
Second Quarter............................................ $46.19 $18.06
Third Quarter............................................. $39.44 $23.38
Fourth Quarter............................................ $37.75 $12.25
Year Ended September 30, 2001
First Quarter through December 7, 2000.................... $ $
</TABLE>
13
<PAGE> 22
RECENT CLOSING PRICES
On October 25, 2000, the last full trading day before the public
announcement of the proposed merger, the high and low sale prices for Novellus
common stock, as reported on The Nasdaq National Market, were $39.50 and
$35.6875. The high and low sale prices for GaSonics common stock on that day, as
reported on The Nasdaq National Market, were $14.875 and $13.75.
The following table sets forth the closing sale price of Novellus common
stock and GaSonics common stock, as reported on The Nasdaq National Market, on
October 25, 2000, the last full trading day prior to the public announcement of
the proposed merger, and December 7, 2000, the latest practicable trading day
prior to the printing of this proxy statement-prospectus. The table also
presents implied equivalent per share value for GaSonics common stock by
multiplying the price per share of Novellus common stock on the dates indicated
by the exchange ratio of 0.52.
<TABLE>
<CAPTION>
CLOSING SALE PRICE
---------------------------------------
GASONICS
EQUIVALENT
NOVELLUS GASONICS (0.52 NOVELLUS)
-------- -------- ---------------
<S> <C> <C> <C>
Price per share:
October 25, 2000....................................... $36.6875 $14.50 $19.0775
December 7, 2000....................................... $ $ $
</TABLE>
You are advised to obtain current market quotations for Novellus and
GaSonics common stock. The market price of the common stock of both companies is
subject to fluctuation. The dollar value of the shares of Novellus common stock
that holders of GaSonics will receive in the proposed merger and the dollar
value of the GaSonics stock they surrender may increase or decrease.
14
<PAGE> 23
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
OF NOVELLUS AND GASONICS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following pro forma combined condensed statements of operations data
set forth below for the fiscal years ended December 31, 1999, 1998 and 1997 have
been derived from Novellus' and GaSonics' audited financial statements. For
purposes of the pro forma combined financial information, we have combined the
financial information of Novellus for the years ended December 31, 1999, 1998
and 1997 with the GaSonics financial information for the years ended September
30, 1999, 1998 and 1997.
The pro forma combined condensed statements of operation data for the nine
months ended September 25, 1999 and September 30, 2000 are based on the
operating results of Novellus for the nine months ended September 25, 1999 and
September 30, 2000 combined with the operating results of GaSonics for the nine
months ended June 30, 1999 and 2000, respectively.
The pro forma combined condensed balance sheet as of September 30, 2000 is
based on the financial position of Novellus as of September 30, 2000 combined
with the financial position of GaSonics as of June 30, 2000.
The pro forma combined statements of operations data and combined balance
sheet illustrate the estimated effects of the merger as if that transaction had
occurred at the beginning of the periods presented and end of the period
presented, respectively.
The following pro forma combined condensed financial statements give effect
to the merger using the pooling of interests method of accounting and include
the pro forma adjustments described in the accompanying notes. We provide the
pro forma combined financial information for informational purposes only. This
financial information does not purport to represent what Novellus' financial
position and results of operations would actually have been had the merger and
other pro forma adjustments in fact occurred at the dates indicated.
You should read the unaudited pro forma combined financial information and
the accompanying notes in conjunction with the historical financial information
and related notes of Novellus and of GaSonics, incorporated by reference in this
document.
We intend to receive a letter, as a condition to closing, from our
independent auditors regarding the appropriateness of pooling-of-interests
accounting for the merger if closed and completed under the terms of the merger
agreement. Under this method of accounting, the recorded historical cost basis
of the assets and liabilities of Novellus and GaSonics will be carried forward
to the operations of the combined company at their historical recorded amounts.
Results of operations of the combined company will include the results of
operations of Novellus and GaSonics for the entire fiscal period in which the
combination occurs, and the historical results of operations of our separate
companies for fiscal years prior to the merger will be combined and reported as
the results of operations of the combined company.
We have not made any adjustments to our unaudited condensed pro forma
financial statement data to conform the accounting policies of the combined
company as we do not expect the nature and amounts of any adjustments to be
significant.
15
<PAGE> 24
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, -----------------------------
------------------------------- SEPTEMBER 25, SEPTEMBER 30,
1997 1998 1999 1999 2000
--------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales........................... $ 655,260 $619,208 $657,020 $442,164 $1,062,327
Cost of sales....................... 310,858 297,039 311,604 213,396 471,944
--------- -------- -------- -------- ----------
Gross profit........................ 344,402 322,169 345,416 228,768 590,383
Operating expenses:
Selling, general and
administrative................. 118,731 124,134 122,666 87,041 148,498
Research and development.......... 107,240 127,003 137,363 100,469 150,693
Costs associated with reduction in
force.......................... -- 1,681 407 407 --
In process research and
development.................... 119,246 -- -- -- --
Restructuring and other costs..... 14,243 -- -- -- --
Litigation settlement and other
related legal costs............ 84,021 -- -- -- --
Bad debt write-off................ 22,217 -- -- -- --
--------- -------- -------- -------- ----------
Total operating expenses....... 465,698 252,818 260,436 187,917 299,191
--------- -------- -------- -------- ----------
Operating income (loss)............. (121,296) 69,351 84,980 40,851 291,192
Interest:
Income............................ 7,621 7,064 16,973 9,740 37,733
Expense........................... (2,832) (4,895) (1,745) -- --
--------- -------- -------- -------- ----------
Net interest and other income....... 4,789 2,169 15,228 9,740 37,733
Income (loss) before provision
(benefit) for income taxes........ (116,507) 71,520 100,208 50,591 328,925
Provision (benefit) for income
taxes............................. (23,856) 24,405 31,501 15,258 102,568
--------- -------- -------- -------- ----------
Net income (loss)................... $ (92,651) $ 47,115 $ 68,707 $ 35,333 $ 226,357
========= ======== ======== ======== ==========
Basic net income (loss) per share... $ (0.87) $ 0.43 $ 0.56 $ 0.29 $ 1.70
Diluted net income (loss) per
share............................. $ (0.87) $ 0.42 $ 0.54 $ 0.28 $ 1.60
Shares used in basic calculation.... 106,860 109,406 122,261 121,123 133,016
Shares used in diluted
calculation....................... 106,860 112,437 127,826 126,358 141,693
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
16
<PAGE> 25
PRO FORMA COMBINED CONDENSED BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
NOVELLUS GASONICS CONDENSED
SEPT. 30, 2000 JUNE 30, 2000 ADJUSTMENTS SEPT. 30, 2000
-------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & Cash Equivalents................ $ 679,828 $ 66,755 $ 746,583
Short-term Investments/marketable
securities.......................... 423,620 17,738 441,358
Accounts Receivable, net............... 355,624 32,108 387,732
Inventories............................ 146,228 25,698 171,926
Deferred Income Taxes.................. 34,633 5,697 2,564(B) 42,894
Prepaid and other current assets....... 10,692 4,386 15,078
---------- -------- ------ ----------
Total current assets.............. 1,650,625 152,382 1,805,571
Property and equipment net............... 130,697 10,359 141,056
Long-term deferred income taxes.......... 5,976 -- 5,976
Other assets............................. 58,890 555 59,445
---------- -------- ------ ----------
Total Assets...................... $1,846,188 $163,296 $2,012,048
========== ======== ====== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current Liabilities:
Accounts payable....................... $ 86,993 $ 15,068 $ 102,061
Accrued payroll and related expenses... 47,490 -- 47,490
Accrued warranty....................... 42,632 -- 42,632
Other accrued liabilities.............. 40,645 14,514 8,775(A) 63,934
Income taxes payable................... 31,837 4,859 36,696
Current obligations under lines of
credit.............................. 16,785 5,382 22,167
---------- -------- ------ ----------
Total current liabilities......... 266,382 39,823 314,980
Commitments and contingencies
Shareholder's equity:
Common stock........................ 1,089,356 91,066 1,180,422
Treasury stock...................... -- (2,639) (2,639)
Additional paid-in capital.......... -- -- --
Retained earnings................... 495,136 35,165 (6,211) (A)(B) 524,090
Subscription receivable............. -- (10) (10)
Accumulated other comprehensive
income............................ (4,686) (109) (4,795)
---------- -------- ------ ----------
Total shareholder's equity........ 1,579,806 123,473 1,697,068
Total Liabilities and
Shareholder's Equity........... $1,846,188 $163,296 $2,012,048
========== ======== ====== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
17
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A) We estimate we will incur direct transaction costs of approximately $8.8
million associated with the merger for professional fees, financial printing
and other related charges. We will charge these transaction costs to
operations in the quarter in which the transaction closes. The pro forma
condensed combined balance sheet gives effect to these costs as if they had
been incurred as of September 30, 2000. We don't include the costs in the
pro forma condensed combined statement of operations data because they are
nonrecurring. Novellus expects to incur additional costs which have not yet
been determined following the completion of the merger associated with
integrating the two companies, which will be expensed as incurred.
(B) The pro forma provision for income taxes has been adjusted to reflect the
pro forma restatement of GaSonics provision for income taxes for the
realization of deferred tax assets in fiscal 1999, rather than in fiscal
2000 on a combined basis assuming, the merger and resulting ability to
utilize GaSonics tax assets in future Novellus consolidated tax returns as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
----------------------------- SEPTEMBER 25, SEPTEMBER 30,
1997 1998 1999 1999 2000
-------- -------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Novellus.............................. $(25,475) $ 27,219 $37,716 $21,473 $ 98,164
GaSonics.............................. 1,619 (2,814) 753
Pro forma adjustment.................. (6,215) (6,215) 3,651
-------- -------- ------- ------- --------
$ 23,856 $ 24,405 $31,501 $15,258 $102,568
======== ======== ======= ======= ========
</TABLE>
In addition, the pro forma balance sheet as of September 30, 2000 has been
adjusted to reflect the cumulative effect of this adjustment.
18
<PAGE> 27
DIVIDEND INFORMATION
Neither of Novellus nor GaSonics have ever paid or declared cash dividends
on the shares of its capital stock. Novellus does not anticipate paying cash
dividends on its common stock for the foreseeable future. Novellus' present
intention is to retain its earnings, if any, for the future operation and
expansion of its business. Any future payment of dividends on Novellus' common
stock will be at the discretion of the board of directors of Novellus and will
depend upon, among other things, Novellus' earnings, financial condition,
capital requirements, level of indebtedness and other factors that the Novellus
board of directors deems relevant.
NUMBER OF STOCKHOLDERS AND NUMBER OF SHARES OUTSTANDING
As of December 7, 2000, there were approximately shareholders of
Novellus of record who held an aggregate of approximately shares of
Novellus common stock.
As of December 7, 2000, there were stockholders of GaSonics of
record who held an aggregate of approximately shares of GaSonics
common stock.
19
<PAGE> 28
RISK FACTORS
By voting in favor of the merger, you will be choosing to invest in
Novellus common stock. An investment in Novellus common stock involves a high
degree of risk which may be in addition to or different from the risks of
investment in GaSonics. In addition to the other information contained in or
incorporated by reference into this proxy statement-prospectus, you should
carefully consider the following risk factors in deciding whether to vote for
the merger.
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Novellus' and GaSonics' financial condition, results of
operations and business and on the expected impact of the merger on Novellus'
financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions identify
forward looking statements. These forward looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties described below and in the
documents incorporated by reference into this proxy statement-prospectus.
TRENDS, RISKS AND UNCERTAINTIES RELATING TO THE MERGER
YOU WILL RECEIVE A FIXED NUMBER OF SHARES OF NOVELLUS COMMON STOCK IN THE
MERGER, NOT A FIXED VALUE.
Upon completion of the merger, each GaSonics share will be converted into
0.52 of a share of Novellus common stock. As the exchange ratio is fixed, the
number of shares that GaSonics stockholders will receive in the merger will not
change, even if the market price of Novellus common stock changes. There will be
no adjustment to the exchange ratio or termination of the merger based on
fluctuations in the price of Novellus common stock. In recent years, and
particularly in recent months, the stock market, in general, and the securities
of technology companies, in particular, including Novellus, have experienced
extreme price and volume fluctuations. These market fluctuations may adversely
affect the market price of Novellus common stock. The market price of Novellus
common stock upon and after completion of the merger could be lower than the
market price on the date of the reorganization agreement or its current market
price. GaSonics stockholders should obtain recent market quotations of Novellus
common stock before they vote on the merger.
In particular, the market price of Novellus' common stock may fluctuate
significantly in response to various factors, including:
- quarterly variations in operating results or growth rates;
- the announcement of technological innovations and other actions by
competitors;
- the introduction of new products;
- changes in estimates by securities analysts;
- market conditions in the industry and general economic conditions; and
- patents and other intellectual property rights issued to competitors of
Novellus.
ALTHOUGH NOVELLUS AND GASONICS EXPECT THAT THE MERGER WILL RESULT IN BENEFITS,
THOSE BENEFITS MAY NOT BE REALIZED.
Achieving the benefits of the merger may depend in part on the integration
of technology, operations and personnel. The integration of Novellus and
GaSonics will be a complex, time consuming and
20
<PAGE> 29
expensive process and may disrupt Novellus' and GaSonics' businesses if not
completed in a timely and efficient manner. The challenges involved in this
integration include the following:
- satisfying the needs of the combined company's customers in a timely and
efficient manner and maintaining GaSonics' and Novellus' key customer
relationships;
- persuading employees that Novellus' and GaSonics' business cultures are
compatible and retaining the combined company's key management,
marketing, customer support and technical personnel;
- maintaining management's ability to focus on anticipating, responding to
or utilizing changing technologies in the semiconductor industry;
- combining GaSonics' product offerings and technologies with Novellus'
product offerings and technologies effectively and quickly and
coordinating research and development activities to enhance introduction
of new products and technologies;
- maintaining GaSonics' key supplier relationships; and
- introduction of new, disruptive technologies to the marketplace which
reduce GaSonics' market share prior to the successful integration of the
two companies.
It is not certain that Novellus and GaSonics can be successfully integrated
in a timely manner or at all or that any of the anticipated benefits of the
merger will be realized. Failure to do so could materially harm the business and
operating results of the combined company. Also, neither Novellus nor GaSonics
can assure you that the growth rate of the combined company will equal the
historical growth rates experienced by Novellus and GaSonics.
CUSTOMER AND EMPLOYEE UNCERTAINTY RELATED TO THE MERGER COULD HARM THE COMBINED
COMPANY.
Novellus' or GaSonics' customers may, in response to the announcement of
the merger, delay or defer purchasing decisions. Any delay or deferral in
purchasing decisions by Novellus' or GaSonics' customers could seriously harm
the business of the combined company. Similarly, Novellus and GaSonics employees
may experience uncertainty about their future role with the combined company
until or after strategies with regard to the combined company are announced or
executed. This may adversely affect the combined company's ability to attract
and retain key management, marketing, sales, customer support and technical
personnel, which could harm the combined company.
NOVELLUS AND GASONICS EXPECT TO INCUR SIGNIFICANT COSTS ASSOCIATED WITH THE
MERGER.
Novellus estimates that it will incur direct transaction costs of
approximately $4.45 million associated with the merger. In addition, GaSonics
estimates that it will incur direct transaction costs of at least $4.325 million
which will be expensed in the quarter that the merger closes. Novellus and
GaSonics believe the combined entity may incur charges to operations, which are
not currently reasonably estimable, in the quarter in which the merger is
completed or the following quarters, to reflect costs associated with
integrating the two companies. There is no assurance that the combined company
will not incur additional material charges in subsequent quarters to reflect
additional costs associated with the merger.
NOVELLUS AND GASONICS MAY NOT BE ABLE TO OBTAIN THE REQUIRED REGULATORY
APPROVALS FOR COMPLETING THE MERGER.
As a condition to the obligations of Novellus and GaSonics to complete the
merger, the waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 must have expired or been terminated. Novellus and GaSonics have
made or will make the required filings with the United States Department of
Justice or the United States Federal Trade Commission and any necessary and
applicable foreign regulatory agencies or governmental entities. Under the
applicable provisions of the Hart-Scott-Rodino Act, Novellus and GaSonics may
not consummate the merger until the expiration of the applicable waiting period.
There can be no assurance that these approvals will be obtained at all or
without materially adverse restrictions or conditions that would have a material
adverse effect on Novellus and
21
<PAGE> 30
GaSonics on a combined basis. Even if regulatory approvals are obtained, a
federal, state, foreign governmental entity or private person may have the right
to challenge the merger at any time before or after its completion.
IF THE MERGER IS NOT COMPLETED, NOVELLUS' AND GASONICS' STOCK PRICES AND FUTURE
BUSINESS AND OPERATIONS COULD BE HARMED.
If the merger is not completed, Novellus and GaSonics may be subject to the
following material risks, among others:
- the prices of Novellus and GaSonics common stock may change to the extent
that the current market prices of Novellus and GaSonics common stock
reflect an assumption that the merger will be completed;
- Novellus' and GaSonics' costs related to the merger, such as legal,
accounting and some of the fees of their financial advisors, must be paid
even if the merger is not completed; and
- under some circumstances (more fully described under "The Reorganization
Agreement -- Expenses; Payment of Termination Fees" on page 72) GaSonics
may be required to pay Novellus a cash termination fee of 3% of the
average closing price of Novellus common stock for the 20 days ending one
day prior to the termination date that would have been received in the
merger as of the date of termination of the reorganization agreement.
Further, with respect to GaSonics, if the merger is terminated and
GaSonics' board of directors determines to seek another merger or business
combination, it is not certain that GaSonics will be able to find a merger
partner or that the new merger partner would be willing to pay an equivalent or
more attractive price than that which would be paid by Novellus in the merger.
While the reorganization agreement is in effect, subject to specified
exceptions, GaSonics is prohibited from entering into or soliciting, initiating
or intentionally encouraging any inquiries or proposals that may lead to a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, tender offer, sale of shares of capital stock or other
similar transactions with any person other than Novellus. These restrictions
could limit GaSonics' ability to enter into an alternative transaction at a
favorable price.
GASONICS' OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.
Certain directors and officers of GaSonics have employment agreements or
other arrangements with GaSonics and may receive offers of employment with
Novellus after the merger and have continuing indemnification against
liabilities that provide them with interests in the merger that are different
from, or in addition to, yours and may therefore be more likely to vote to
approve the reorganization agreement and the merger than if they did not have
these interests. GaSonics stockholders should consider whether these interests
may have influenced these directors and officers to support or recommend the
merger. You should read more about these interests under "The
Merger -- Interests of Directors and Executive Officers of GaSonics in the
Merger" on page 57.
TRENDS, RISKS AND UNCERTAINTIES RELATING TO NOVELLUS
NOVELLUS' QUARTERLY OPERATING RESULTS HAVE FLUCTUATED AND ARE LIKELY TO
FLUCTUATE SUBSTANTIALLY IN THE FUTURE BECAUSE OF A NUMBER OF FACTORS, MANY OF
WHICH ARE BEYOND ITS CONTROL.
If Novellus' operating results are below the expectations of public market
analysts or investors, then the market price of its common stock could decline.
Novellus has experienced and expects to continue to experience significant
fluctuations in its quarterly operating results. During each quarter, Novellus
customarily sells a relatively small number of systems that typically sell for
prices in excess of $1 million. Novellus' backlog at the beginning of each
quarter does not necessarily include all system sales needed to achieve expected
net sales for that quarter. Consequently, Novellus is often dependent on
obtaining orders
22
<PAGE> 31
for shipment in the same quarter that the order is received. Because Novellus
builds its systems according to forecast, the absence of significant backlog for
an extended period of time could hinder Novellus' ability to plan production and
inventory levels, which could adversely affect operating results. Novellus' net
sales and operating results could also be adversely affected for a particular
quarter if an anticipated order for even a few systems is not received in time
to permit shipment during that quarter. Moreover, customers may reschedule or
cancel shipments, with, in the case of cancellations, little or no penalties,
and production difficulties could delay shipments. A delay in a shipment in any
quarter, due, for example, to an unanticipated shipment rescheduling, to
cancellations by customers or to unexpected manufacturing difficulties
experienced by Novellus may cause net sales in such quarter to fall
significantly below expectations and may materially adversely affect Novellus'
operating results for such quarter.
The timing of new product announcements and releases by Novellus may also
contribute to fluctuations in quarterly operating results, particularly in cases
where new product offerings cause customers to defer ordering products from
Novellus' existing product lines. Novellus' results of operations also could be
affected by new product announcements and releases by Novellus' competitors, the
volume, mix and timing of orders received during a period, availability and
pricing of key components, fluctuations in foreign exchange rates, and
conditions in the semiconductor equipment industry. Novellus' operating results
also fluctuate based on gross profit realized on system sales. Gross profit as a
percentage of net sales may vary based on a variety of factors, including the
mix and average selling prices of products sold and costs to manufacture
upgrades and customize systems. Because Novellus' operating expenses are based
on anticipated net sales levels, and a high percentage of those expenses are
relatively fixed, a variation in the timing of recognition of net sales and the
level of gross profit from a single transaction can cause material variations in
operating results from quarter to quarter.
DOWNTURNS IN THE SEMICONDUCTOR INDUSTRY CAN HARM NOVELLUS' OPERATING RESULTS.
Novellus' business depends predominantly on capital expenditures of
semiconductor manufacturers, which in turn depends on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry has historically been very
cyclical and has experienced periodic downturns, which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by Novellus.
During periods of reduced and declining demand, Novellus must be able to quickly
and effectively align its cost structure with prevailing market conditions, and
motivate and retain key employees. During periods of rapid growth, Novellus must
be able to acquire and/or develop sufficient manufacturing capacity to meet
customer demand, and hire and assimilate a sufficient number of qualified
people. No assurance can be given that Novellus' net sales and operating results
will not be adversely affected if downturns or slowdowns in the rate of capital
investment in the semiconductor industry occur in the future.
INTENSE COMPETITORS IN THE SEMICONDUCTOR EQUIPMENT INDUSTRY MAY REDUCE THE
DEMAND FOR NOVELLUS' PRODUCTS OR THE PRICES OF NOVELLUS' PRODUCTS, WHICH COULD
REDUCE NOVELLUS' REVENUES.
The semiconductor equipment industry is highly competitive. Novellus faces
substantial competition in the markets in which it competes from both
established competitors and potential new entrants. In the chemical vapor
deposition (CVD) and physical vapor deposition (PVD) markets, Novellus'
principal competitor is Applied Materials, Inc., which is a major supplier of
CVD and PVD systems that has established a substantial base of CVD, PVD and
other equipment in large semiconductor manufacturers. Certain of Novellus'
competitors have greater financial, marketing, technical or other resources,
broader product lines, greater customer service capabilities and larger and more
established sales organizations and customer bases than Novellus. Novellus may
also face future competition from new market entrants from overseas and domestic
sources. Novellus expects its competitors to continue to improve the design and
performance of their products. There can be no assurance that Novellus'
competitors will not develop enhancements to or future generations of
competitive products that will offer superior price or performance features over
Novellus' products, and there can be no assurance that Novellus will be
successful, or as
23
<PAGE> 32
successful as its competitors, in selecting, developing, manufacturing, and
marketing its new products, or enhancing its existing products. Failure to
successfully develop new products could materially adversely affect Novellus'
revenues, financial condition, and results of operations. In addition, a
substantial investment is required by Novellus' customers to install and
integrate capital equipment into a semiconductor production line. As a result,
once a semiconductor manufacturer has selected another vendor's capital
equipment, Novellus believes that the manufacturer will be generally reliant
upon that equipment vendor for the specific production line application.
Accordingly, Novellus may experience difficulty in selling a product to a
particular customer for a significant period of time if that customer first
selects a competitor's product. Increased competitive pressure could lead to
lower prices for Novellus' products, thereby adversely affecting Novellus'
revenue and operating results. There can be no assurance that Novellus will be
able to compete successfully against established competitors and new entrants in
the future.
THE CONVERSION IN EUROPE TO THE EURO CURRENCY MAY AFFECT NOVELLUS' COMPETITIVE
POSITION IN EUROPE.
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and adopted the Euro as their new common legal currency. As of that date, the
Euro traded on currency exchanges and the legacy currencies remain legal tender
in the participating countries for a transition period between January 1, 1999
and January 1, 2002. During the transition period, non-cash payments can be made
in the Euro, and parties can elect to pay for goods and services and transact
business using either the Euro or legacy currency. Between January 1, 1999 and
January 1, 2002 the participating countries will introduce Euro notes and coins
and withdraw all legacy currencies so that they will no longer be available. The
Euro conversion may affect cross-border competition by creating cross-border
transparency. Novellus is assessing its pricing/marketing strategy in an effort
to insure that it remains competitive in a broader European market. Novellus is
also assessing its information technology systems in an effort to allow for
transactions to take place in both legacy currencies and the Euro with the
eventual elimination of the legacy currencies, and is reviewing whether certain
existing contracts will be need to be modified. Novellus' currency risk and risk
management for operations in participating countries may be reduced as the
legacy currencies are converted to the Euro.
NOVELLUS HAS LIMITED PRODUCT OFFERINGS.
Since the introduction of Novellus' original Concept One Dielectric system
in 1987, Novellus has developed and now offers a limited family of processing
systems for the dielectric and metal deposition markets. The Concept One
Dielectric deposits a variety of insulating or "dielectric" films on wafers
including Oxide, Nitride and TEOS. In 1990, Novellus introduced a modified
version of the Concept One-Dielectric, the Concept One-W, which also uses a CVD
process to deposit blanket tungsten metal films on wafers primarily as the metal
interconnect between conductor layers in the integrated circuit layers. In
November 1991, Novellus introduced the Concept Two, which is a modular,
integrated production system capable of depositing both dielectric and
conductive metal layers by combining one or more processing chambers around a
common, automated robotic wafer handler. In February 1996, Novellus introduced
SPEED on the Concept Two platform, targeted at advanced inter-metal dielectric
(IMD) deposition. Following the acquisition of Varian's Thin Film Systems
Division, Novellus announced the introduction of its INOVA system, an advanced
PVD system that delivers Maxfill aluminum and Ti/Ti-nitride film quality for
aluminum barrier layer applications, as well as highly conformal tantalum
barrier copper seed layers (barrier/seed) for copper conductive layers. Most
recently, in June 1998 Novellus announced the SABRE copper Electrofill(TM)
system for producing copper conductive layers. With the SABRE product
announcement, Novellus now provides its customers with the entire set of metal
and dielectric deposition processes required for 0.25 micron devices.
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A LARGE PORTION OF NOVELLUS' NET SALES IS DERIVED FROM SALES TO A FEW CUSTOMERS;
THE LENGTHY PROCESS REQUIRED FOR NOVELLUS' SALES MAY IMPEDE NOVELLUS' SALES
GROWTH.
Historically, Novellus has sold a significant proportion of its systems in
any particular period to a limited number of customers. Sales to Novellus' ten
largest customers in 1999, 1998 and 1997 accounted for 65%, 57%, and 48% of net
sales, respectively. Novellus expects that sales of its products to relatively
few customers will continue to account for a high percentage of its net sales in
the foreseeable future. None of Novellus' customers have entered into a
long-term agreement requiring them to purchase Novellus' products. Novellus
believes that sales to certain of its customers will decrease in the near future
as those customers complete current purchasing requirements for new or expanded
fabrication facilities. Although the composition of the group comprising
Novellus' largest customers has varied from year to year, the loss of a
significant customer or any reduction in orders from any significant customer,
including reductions due to customer departures from recent buying patterns,
market, economic or competitive conditions in the semiconductor industry or in
the industries that manufacture products utilizing integrated circuits, could
adversely affect Novellus' business, financial condition and results of
operations. In addition, sales of Novellus' systems depend in significant part
upon the decision of a prospective customer to increase manufacturing capacity
or to expand current manufacturing capacity, both of which typically involve a
significant capital commitment. Novellus has from time to time experienced
delays in finalizing system sales following initial system qualification. Due to
these and other factors, Novellus' systems typically have a lengthy sales cycle
during which Novellus may expend substantial funds and management effort with no
guarantee that Novellus will sell a particular system.
NOVELLUS' INDUSTRY IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY AND NOVELLUS'
OPERATING RESULTS COULD BE HARMED IF NOVELLUS DOES NOT SUCCESSFULLY DEVELOP,
INTRODUCE AND SELL NEW PRODUCTS.
The semiconductor manufacturing industry is subject to rapid technological
change and new product introductions and enhancements. Novellus' ability to
remain competitive in this market depends in part upon Novellus' ability to
develop new and enhanced systems and to introduce these systems at competitive
prices and on a timely and cost-effective basis. Accordingly, Novellus devotes a
significant portion of its personnel and financial resources to research and
development programs and seek to maintain close relationships with its customers
to remain responsive to their product needs. Novellus' current research and
development efforts are directed at development of new systems and processes and
improving existing system capabilities. Novellus is focusing its research and
development efforts on additional Concept Two modules, advanced PVD systems,
advanced gap fill technology, primary conductor metals, low-k dielectric
materials and additional advanced technologies for the next generation of
smaller geometry fabrication lines, as well as equipment to process 300mm
wafers. There is no assurance that Novellus' research and programs will allow
Novellus to remain responsive to its customers' product needs or that Novellus'
current or new customers will buy its new products.
RESEARCH AND DEVELOPMENT EXPENDITURES REPRESENT A SUBSTANTIAL PORTION OF
NOVELLUS' NET SALES WITH NO GUARANTEE OF DEVELOPING OR SELLING NEW SYSTEMS.
Novellus' expenditures for research and development during 1999, 1998 and
1997 were $119.7 million, $106.5 million, and $89.8 million, respectively, or
approximately 20%, 21%, and 17% of net sales, respectively. The amount and
percentage of sales in 1997 for research and development exclude the in-process
research and development charge of $119.2 million related to the acquisition of
Varian's Thin Film Systems business (TFS). Novellus expects in future years that
research and development expenditures will continue to represent a substantial
percentage of its net sales. Novellus' success in developing, introducing and
selling new and enhanced systems depends upon a variety of factors, including
product selection, timely and efficient completion of product design and
development, timely and efficient implementation of manufacturing and assembly
processes, product performance in the field and effective sales and marketing.
There can be no assurance that Novellus will be successful in selecting,
developing, manufacturing and marketing new products or in enhancing its
existing products. As is typical in the semiconductor capital equipment market,
Novellus has experienced delays from time to time in the
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introduction of, and certain technical and manufacturing difficulties with,
certain of its systems and enhancements and may experience delays and technical
and manufacturing difficulties in future introductions or volume production of
new systems or enhancements. Novellus' inability to complete the development or
meet the technical specifications of any of its new systems or enhancements or
to manufacture and ship these systems or enhancements in volume in a timely
manner would materially adversely affect Novellus' business, financial condition
and results of operations. In addition, Novellus may incur substantial
unanticipated costs to ensure the functionality and reliability of its future
product introductions early in the product's life cycle. If new products have
reliability or quality problems, reduced orders or higher manufacturing costs,
delays in collecting accounts receivable and additional service and warranty
expense may result. Any of these events could materially adversely affect
Novellus' business, financial condition and results of operations.
BECAUSE NOVELLUS' INTELLECTUAL PROPERTY IS CRITICAL TO THE SUCCESS OF ITS
BUSINESS, NOVELLUS' OPERATING RESULTS WOULD SUFFER IF NOVELLUS IS UNABLE TO
ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY.
Novellus intends to continue to pursue the legal protection of its
technology primarily through patent and trade secret protection. Novellus
currently holds over 100 patents and intends to file additional patent
applications as appropriate. There can be no assurance that patents will be
issued from any of these pending applications or that any claims allowed from
existing or pending patents will be sufficiently broad to protect Novellus'
technology. While Novellus intends to protect its intellectual property rights
vigorously, there can be no assurance that any patents held by Novellus will not
be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide competitive advantages to Novellus. Novellus also relies
on trade secrets and proprietary technology that it seeks to protect, in part,
through Novellus' confidentiality agreements with employees, consultants and
other parties. There can be no assurance that these agreements will not be
breached, that Novellus will have adequate remedies for any breach, or that
Novellus' trade secrets will not otherwise become known to or independently
developed by others.
There has also been substantial litigation regarding patent and other
intellectual property rights in semiconductor related industries. Novellus is
currently involved in such litigation (see "Legal Proceedings" as set forth in
Novellus' Quarterly Report on Form 10-Q for the quarter ended September 30,
2000). Except as set forth in "Legal Proceedings," Novellus is not aware of any
claim of infringement by Novellus' products of any patent or proprietary rights
of others, however, Novellus could become involved in additional litigation in
the future. Although Novellus does not believe the outcome of the current
litigation will have a material impact on its business, financial condition or
results of operations, no assurances can be given that this litigation or future
litigation will not have such an impact. In addition to the current litigation,
Novellus' operations, including the further commercialization of Novellus'
products, could provoke additional claims of infringement from third parties. In
the future, litigation may be necessary to enforce patents issued to Novellus,
to protect trade secrets or know-how owned by Novellus or to defend Novellus
against claimed infringement of the rights of others and to determine the scope
and validity of the proprietary rights of others. Any such litigation could
result in substantial cost and diversion of effort by Novellus, which by itself
could have a material adverse effect on Novellus' financial condition and
operating results. Further, adverse determinations in such litigation could
result in Novellus' loss of proprietary rights, subject Novellus to significant
liabilities to third parties, require Novellus to seek licenses from third
parties or prevent Novellus from manufacturing or selling its products, any of
which could have a material adverse effect on Novellus' business, financial
condition and results of operations.
BECAUSE NOVELLUS DEPENDS ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR KEY
PARTS FOR ITS PRODUCTS, NOVELLUS IS SUSCEPTIBLE TO SUPPLY SHORTAGES THAT COULD
ADVERSELY AFFECT ITS OPERATING RESULTS.
Novellus uses numerous suppliers to supply parts, components and
subassemblies for the manufacture and support of its products. Although Novellus
makes reasonable efforts to ensure that such parts are available from multiple
suppliers, this is not always possible. Accordingly, Novellus obtains certain
key parts from a single supplier or a limited group of suppliers. These
suppliers are, in some cases, thinly
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capitalized, independent companies that generate significant portions of their
business from Novellus and/or a small group of other companies in the
semiconductor industry. Although Novellus seeks to reduce its dependence on
these limited source suppliers, disruption or termination of certain of these
sources could occur and such disruptions could have at least a temporary adverse
effect on Novellus' operations. Moreover, a prolonged inability to obtain
certain components could have a material adverse effect on Novellus' business,
financial condition and results of operations and could result in damage to its
customer relationships.
BECAUSE NOVELLUS SELLS ITS PRODUCTS TO CUSTOMERS OUTSIDE OF THE UNITED STATES,
NOVELLUS FACES FOREIGN BUSINESS, POLITICAL AND ECONOMIC RISKS THAT COULD HARM
ITS OPERATING RESULTS.
Export sales accounted for approximately 67%, 51%, and 47% of Novellus' net
sales in 1999, 1998, and 1997, respectively. Novellus anticipates that export
sales will account for a significant portion of net sales in the foreseeable
future. As a result, a significant portion of Novellus' sales will be subject to
certain risks, including tariffs and other barriers, difficulties in staffing
and managing foreign subsidiary operations, difficulties in managing
distributors, potentially adverse tax consequences and the possibility of
difficulty in accounts receivable collection. Novellus is also subject to the
risks associated with the imposition of legislation and regulations relating to
the import or export of semiconductor products. Novellus cannot predict whether
quotas, duties, taxes, or other charges or restrictions will be implemented by
the United States or any other country upon the importation or exportation of
Novellus' products in the future. There can be no assurance that any of these
factors or the adoption of restrictive policies will not have a material adverse
effect on Novellus' business, financial condition or results of operations.
Moreover, each region in the global semiconductor equipment market exhibits
unique characteristics that can cause capital equipment investment patterns to
vary significantly from period to period. Although international markets provide
Novellus with significant growth opportunities, periodic economic downturns,
trade balance issues, political instability and fluctuations in interest and
foreign currency exchange rates are all risks that could materially and
adversely affect global products and service demand, and, therefore, Novellus'
business operations and financial condition. Asian countries, particularly Japan
and Korea, are affected by banking, currency and other difficulties that
contribute to the economic developments in those countries. Novellus derives a
substantial portion of its revenues from customers in Asian countries,
particularly Japan and Korea. Economic developments in late 1997 and early 1998
resulted in decreased capital investments by Asian customers. Recent economic
developments indicate that the economies of Japan, Korea and other Asian
countries have recovered somewhat from 1997 and 1998 levels. Any negative
economic developments or delays in the economic recovery of Asian countries
could result in the cancellation or delay of orders for Novellus' products from
Asian customers, thus materially adversely affecting Novellus' business,
financial condition or results of operations.
In addition to the concerns described above, sales of systems shipped by
Novellus' Japanese subsidiary are denominated in Japanese Yen. Novellus sells
the systems to its Japanese subsidiary in U.S. Dollars. Novellus then enters
into forward foreign exchange contracts to hedge against the short-term impact
of foreign currency fluctuations of intercompany accounts payable denominated in
U.S. Dollars recorded by the Japanese subsidiary in order to manage this
exposure. However, there can be no assurance that future changes in the Japanese
Yen will not have a material effect on Novellus' business, financial condition
or results of operations.
IF NOVELLUS DOES NOT HIRE, RETAIN AND INTEGRATE HIGHLY SKILLED PERSONNEL, ITS
BUSINESS MAY SUFFER.
The success of Novellus' future operations depends in large part on
Novellus' ability to recruit and retain engineers and technicians, as well as
marketing, sales, service and other key personnel, who in each case are in great
demand. There can be no assurance that Novellus will be successful in retaining
or recruiting key personnel. Novellus' success depends to a significant extent
upon a limited number of key employees and other members of senior management.
The loss of the service of one or more of these key employees could have a
material adverse effect on Novellus.
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None of Novellus' employees are represented by a labor union and Novellus
has never experienced a work stoppage, slowdown, or strike. Novellus currently
considers its employee relations to be good.
NOVELLUS HAS EXPERIENCED A PERIOD OF RAPID GROWTH AND IF NOVELLUS IS NOT ABLE TO
SUCCESSFULLY MANAGE THIS AND FUTURE GROWTH, NOVELLUS' BUSINESS MAY SUFFER.
Although Novellus has recently experienced significant growth in net sales,
there can be no assurance that Novellus will be able to continue to maintain or
increase the level of net sales in future periods. This growth has placed, and
is expected to continue to place, a significant strain on Novellus' management
and operations. Novellus' inability to effectively manage growth, or to attract
and retain the personnel it requires, could have a material adverse effect on
Novellus' business, financial condition and results of operations.
THE PRICE OF NOVELLUS' COMMON STOCK MAY FLUCTUATE WIDELY AND MAY DECLINE.
The price of Novellus' common stock may be subject to wide fluctuations and
possible rapid increases or declines in a short time period. These fluctuations
may be due to factors specific to Novellus, such as variations in quarterly
operating results or changes in analysts' earnings estimates, or to factors
relating to the semiconductor industry or to the securities markets in general,
which, in recent years, have experienced significant price fluctuations. These
fluctuations often have been unrelated to the operating performance of the
specific companies whose stocks are traded. Shareholders should be willing to
incur the risk of such fluctuations. Sales of substantial amounts of Novellus
common stock in the public market after any offering of Novellus' securities
could adversely affect the market price of the outstanding Novellus common
stock.
NOVELLUS' PENDING LITIGATION AND OTHER POTENTIAL LITIGATION MAY HARM ITS
OPERATING RESULTS.
Applied Materials, Inc. vs. Varian Associates Inc. (Case No. C-97-20523 RMW) and
Novellus Systems, Inc. v. Applied Materials, Inc. (Case No. C-97-20551 RMW)
On July 7, 1997, prior to the consummation of the purchase of TFS from
Varian, Applied Materials ("Applied") filed a complaint (the "Applied
Complaint") against Varian in the United States District Court for the Northern
District of California San Jose Division, Civil Action No. C-97-20523 RMW,
alleging, among other things, infringement by Varian of certain products and
systems made by TFS of United States Patent Nos. 5,171,412, 5,186,718, 5,496,455
and 5,540,821 (the "Applied Patents"), which patents are owned by Applied.
Following consummation of the TFS purchase, Novellus filed a complaint (the
"Novellus Complaint") against Applied in the same Court, Civil Action No.
C-97-20551 RMW, alleging infringement by Applied of United States Patent Nos.
5,314,597, 5,330,628, and 5,635,036 (the "Novellus Patents"). In the Novellus
Complaint, Novellus also alleged that it is entitled to a declaration from the
Court that Novellus does not infringe the Applied Patents and/or that the
Applied Patents are invalid and/or unenforceable. Applied has filed
counterclaims alleging that it does not infringe the Novellus Patents and that
the Novellus Patents are invalid and/or unenforceable.
After Novellus filed the Novellus Complaint, Applied sought to amend the
Applied Complaint to add Novellus as a defendant. Novellus has requested that
the Court dismiss Novellus as a defendant in Applied's lawsuit against Varian.
On January 14, 2000, Applied withdrew its U.S. Patent No. 5,496,455 from
the lawsuits against Novellus and Varian. On March 16, 2000, the Court granted
Varian's motion for summary judgment that claims 14 & 18 of Applied's U.S.
Patent No. 5,171,412 are invalid.
On August 8, 2000, the Court granted Novellus' and Varian's motion for
summary judgment that the Inova does not infringe Applied's U.S. Patent No.
5,186,718.
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On or about September 25, 2000, Varian and Applied executed a "License and
Settlement Agreement." On September 29, 2000 Varian and Applied filed a
Stipulated Dismissal with Prejudice with the Court that reciprocally dismisses
all causes of action that Varian and Applied had asserted or could have asserted
against one another in the litigation. In addition, Applied has stated, in its
agreement with Varian, that it will release Novellus from all claims that arose
out of or relate to the litigation that relate to any infringement alleged with
respect to the Inova, in the form as it existed as of the effective date of the
TFS purchase. The Stipulated Dismissal, however, expressly excludes Novellus
from the scope of any release.
Semitool, Inc. v. Novellus Systems, Inc. (Case No. C-98-3089 DLJ)
On August 10, 1998, Semitool sued Novellus for patent infringement in the
United States District Court for the Northern District of California. Semitool
alleges that Novellus' SABRE(TM) and SABRE xT(TM) copper deposition systems
infringe two Semitool patents, U.S. Patent No. 5,222,310, and U.S. Patent No.
5,377,708. Semitool seeks an injunction against Novellus' manufacture and sale
of SABRE(TM) and SABRE xT(TM) systems, and seeks damages for past infringement.
Semitool also seeks trebled damages for alleged willful infringement. Semitool
further seeks its attorneys' fees and costs, and interest on any judgement.
On September 24, 1999, the Court ruled on the interpretation of the claims
of the Semitool patents. On December 18, 1999, Novellus filed a motion for
summary judgement of non-infringement.
On March 17, 2000, the Court granted Novellus' motion for summary judgement
of non-infringement. The Court ruled that Novellus' SABRE(TM)and SABRE xT(TM)
systems do not infringe the two patents asserted by Semitool.
On May 15, 2000, Semitool filed a notice of appeal, appealing the Court's
judgement to the United States Court of Appeals for the Federal Circuit.
Semitool filed its opening brief on July 24, 2000. Novellus filed its opening
brief on October 3, 2000.
Plasma Physics Litigation
On December 28, 1999, Plasma Physics Corporation and Solar Physics
Corporation (collectively, "Plasma Physics") filed a patent infringement lawsuit
against many of Novellus' Japanese and Korean customers. The suit was entitled
Plasma Physics and Solar Physics v. Fujitsu et al., Civil Action No. 99-8593,
and was pending in the United States District Court for the Eastern District of
New York. On July 24, 2000, the Court ordered Plasma Physics to re-file separate
complaints against the Japanese and Korean defendants, whereupon, Civil Action
No. 99-8593 would be dismissed without prejudice. In accordance with the Court's
order, Plasma Physics has since re-filed separate complaints against the
Japanese and Korean defendants in the United States District Court for the
Eastern District of New York. Many of the defendants have notified Novellus that
they believe that Novellus has indemnification obligations and liability for the
lawsuits.
Plasma Physics has asserted U.S. Patent Nos. 4,226,897, 5,470,784, and
5,543,634 (the "'897, '784, and '634 patents," respectively). Plasma Physics
seeks an injunction against the defendants' alleged infringement of the '784 and
'634 patents (the '897 patent has expired). Plasma Physics also seeks trebled
damages for alleged willful infringement. Plasma Physics further seeks its
attorney's fees and costs, and interest on any judgement.
On June 1, 2000, Novellus filed a declaratory relief action against Plasma
Physics and Solar Physics requesting a judgement of non-infringement,
invalidity, and unenforceability with respect to the '897 and '784 patents. The
suit is entitled Novellus v. Plasma Physics and Solar Physics, Civil Action No.
00-3146, and is pending in the United States District Court for the Eastern
District of New York. On June 30, 2000, Plasma Physics filed a motion to dismiss
Novellus' complaint for a lack of subject matter jurisdiction. Plasma Physics'
motion to dismiss Novellus' complaint was denied without prejudice on July 24,
2000. On July 31, 2000, Plasma Physics filed an Answer and Conditional
Counterclaim. Plasma
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Physics denies that the '897 and '784 patents are invalid and unenforceable.
Plasma Physics further denies that the '784 patent is not infringed by Novellus.
Plasma Physics also asserted a conditional counterclaim against Novellus,
alleging that Novellus' PECVD processing systems infringe the '784 patent.
Novellus believes that there are meritorious defenses to Plasma Physics'
allegations, including among other things, that the defendants' use of Novellus'
equipment does not infringe the Plasma Physics patents and/or that the Plasma
Physics patents are invalid and/or unenforceable. But the resolution of
intellectual property disputes is often fact intensive and, like most other
litigation matters, inherently uncertain. Although Novellus believes that the
ultimate outcome of the dispute with Plasma Physics will not have a material
adverse effect on Novellus' business, financial condition, or result of
operations (taking into account the defenses available to Novellus), there can
be no assurances that Plasma Physics will not ultimately prevail in this dispute
and that Novellus will not have any indemnity obligations or liability. If
Plasma Physics were to prevail in the dispute, it could have a material adverse
effect on Novellus' business, financial condition or results of operations.
Other Litigation
In addition, in the normal course of business Novellus from time to time
receives inquiries with regard to possible other patent infringements. Novellus
believes it is unlikely that the outcome of the patent infringement inquiries
will have a material adverse effect on its financial position or results of
operations. There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Although
Novellus is not aware of any claims of infringement of any patents or
proprietary rights of others by its products, except those claimed by Applied,
Semitool and Plasma Physics, further commercialization of Novellus' products
could provoke claims of infringement from third parties. In the future,
litigation may be necessary to enforce patents issued to Novellus, to protect
trade secrets or know-how owned by Novellus or to defend Novellus against
claimed infringement of the rights of others and to determine the scope and
validity of the proprietary rights of others. Any such litigation could result
in substantial cost and diversion of effort by Novellus, which by itself could
have a material adverse effect on Novellus' financial condition and operating
results. Further, adverse determinations in such litigation could result in
Novellus' loss of proprietary rights, subject Novellus to significant
liabilities to third parties, require Novellus to seek licenses from third
parties or prevent Novellus from manufacturing or selling its product, any of
which could have a material adverse effect on Novellus business, financial
condition and results of operations.
NOVELLUS' USE OF FINANCIAL INSTRUMENTS SUBJECTS NOVELLUS TO RISKS RELATED TO THE
CONCENTRATIONS OF CREDIT.
Novellus uses financial instruments that potentially subject it to
concentrations of credit risk. Such instruments include cash equivalents,
short-term investments, accounts receivable, and financial instruments used in
hedging activities. Novellus invests its cash in cash deposits, money market
funds, commercial paper, certificates of deposit, readily marketable debt
securities, or medium term notes. Novellus places its investments with
high-credit-quality financial institutions and limits the credit exposure from
any one financial institution or instrument. To date, Novellus has not
experienced material losses on these investments. Novellus performs ongoing
credit evaluations of its customers' financial condition and generally requires
no collateral. Novellus has an exposure to nonperformance by counterparties on
the foreign exchange contracts used in hedging activities. These counterparties
are large international financial institutions and to date, no such counterparty
has failed to meet its financial obligations to Novellus. Novellus does not
believe there is a significant risk of nonperformance by these counterparties
because Novellus continuously monitors its positions and the credit ratings of
such counterparties and the amount of the contracts Novellus enters into with
any one party. However, there can be no assurance that there will be no
significant nonperformance by these counterparties and that this would not
materially adversely affect Novellus business, financial condition, and results
of operations.
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TRENDS, RISKS AND UNCERTAINTIES RELATING TO GASONICS
GASONICS OPERATING RESULTS COULD FLUCTUATE, WHICH MAY CAUSE ITS STOCK PRICE TO
DECLINE.
GaSonics' operating results have fluctuated significantly in the past, and
GaSonics expects that results will continue to fluctuate significantly in the
future for a number of reasons, including:
- the cyclical nature of the semiconductor industry;
- changes in pricing by it, competitors, customers or suppliers;
- inventory obsolescence;
- accounts receivable write-offs;
- product mix;
- the timing of new product announcements and releases by it or its
competitors;
- delays, cancellations or rescheduling of customer orders;
- GaSonics' ability to produce systems in volume and meet customer
requirements;
- the ability of any customer to finance purchases of its equipment;
- procedures and controls;
- changes in overhead absorption levels due to changes in the number of
systems manufactured; and
- lengthy sales cycles.
Fluctuations in GaSonics' operating results may adversely impact its stock
price. Furthermore, if these factors are not adequately addressed, they may harm
GaSonics business.
THE CYCLICAL NATURE OF THE SEMICONDUCTOR DEVICE INDUSTRY COULD HARM GASONICS'
OPERATING RESULTS.
GaSonics' operating results have varied, and will continue to vary in the
future, due to the cyclical nature of the semiconductor device industry.
Downturns in the semiconductor device industry will likely lead to
proportionately greater downturns in GaSonics' revenues. GaSonics' business
depends upon the capital expenditures of semiconductor device manufacturers,
which, in turn, depend upon the current and anticipated market demand for
semiconductors and products using semiconductors. The semiconductor device
industry is cyclical and has historically experienced periodic downturns, which
have often resulted in substantial decreases in demand for semiconductor capital
equipment, including photoresist removal and residue removal equipment. There is
typically a six to twelve month lag between a change in the economic condition
of the semiconductor device industry and the resulting change in the level of
capital expenditures by semiconductor device manufacturers. In most cases, the
resulting decrease in capital expenditures has been more pronounced than the
precipitating downturn in semiconductor device industry revenues. The
semiconductor device industry experienced downturns in 1998 and 1996, during
which industry revenues declined by an estimated 8.4% and 8.6% as reported by
World Semiconductor Trade Statistics, Inc. During these periods, GaSonics
experienced reduced demand for our products, significant cancellations and
delays of new orders and rescheduling of existing orders, which harmed its
financial results.
The semiconductor device industry may experience severe and prolonged
downturns in the future. Future downturns in the semiconductor device industry,
or any failure of that industry to fully recover from its recent downturn, will
seriously harm GaSonics' business, financial condition and results of
operations.
GASONICS' QUARTERLY RESULTS MAY FLUCTUATE, WHICH MAY HARM ITS BUSINESS.
In the past, GaSonics have experienced fluctuations in its quarterly
results and fluctuations may continue in the future. Specifically, GaSonics'
quarterly net sales and operating results have in the past,
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and will in the future, depend upon obtaining orders and shipping systems in the
same quarter. Backlog at the beginning of a quarter typically does not include
all orders required to achieve its sales objectives for that quarter. In
addition, orders in backlog are subject to cancellations or reschedulings by
customers with limited or no penalties. GaSonics cannot forecast the timing of
these occurrences or their impact on its sales and operating results. GaSonics
has experienced and will continue to experience cancellations and rescheduling
of orders. Consequently, backlog at any particular date is not necessarily
representative of actual sales expected for the succeeding period. GaSonics'
business for a particular quarter may also be harmed if an anticipated order is
not received in time to permit shipment during the same quarter.
Moreover, GaSonics' quarterly results fluctuate because a substantial
portion of its revenues is derived from the sale of its systems, which typically
range in price from approximately $150,000 to $2.0 million or more. As a result,
operating results for a particular quarter could be significantly impacted by
the timing of a single transaction.
Furthermore, significant investments in research and development, capital
equipment and customer service and support capability worldwide have resulted in
significant fixed costs, which GaSonics has not been and will not be able to
reduce rapidly if sales goals for a particular period are not met. As a result,
a delay in generating or recognizing revenue for any reason could cause
significant variations in GaSonics' operating results from quarter to quarter
and could result in greater than expected operating losses. Also, because
GaSonics manufactures its systems according to forecast, a reduction in customer
orders or backlog could lead to excess inventory and possible inventory
obsolescence, increasing costs and reducing margins that could harm its
business, financial condition and results of operations.
GASONICS' GROSS MARGINS MAY FLUCTUATE, WHICH MAY HARM ITS BUSINESS.
Historically, GaSonics' gross margins have varied significantly, and
GaSonics expects that its gross margins will continue to vary based on a variety
of factors, including:
- sales mix and average selling prices of its systems;
- price-based competition;
- mix of revenues, including spare parts, service and support revenues;
- costs associated with new product introductions and enhancements;
- configuration and installation costs;
- delays, cancellations or rescheduling of customer orders;
- underabsorption of manufacturing overhead and field service and support
infrastructure; and
- start-up inefficiencies associated with new products.
If the factors causing fluctuations are not adequately addressed, they may
harm GaSonics' business and adversely impact its stock price.
IF GASONICS DOES NOT CONTINUALLY IMPROVE ITS SYSTEMS IN RESPONSE TO RAPID
TECHNOLOGICAL CHANGES, GASONICS WILL ENCOUNTER A DECLINE IN SALES OR A LOSS OF
MARKET ACCEPTANCE.
The semiconductor manufacturing industry is characterized by rapid
technological change resulting in new product introductions and enhancements.
Failure to keep pace with technological developments in the semiconductor
manufacturing industry, to translate technological development into systems and
products on a timely and cost-effective basis, or to develop a sufficient volume
of manufacturing for new products would significantly harm GaSonics' business.
Furthermore, new product introductions or enhancements and new technologies
developed by its competitors could result in a decline in GaSonics' sales and
loss of market acceptance of its existing products.
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GaSonics' success in developing, introducing and selling new and enhanced
systems depends upon a variety of factors, including:
- product selection relative to the technological and commercial needs of
the industry;
- timely and efficient completion of product design and development;
- timely and efficient execution of the manufacturing and assembly
processes;
- effective sales and marketing; and
- product performance and reliability in the field.
Because new product development commitments must be made well in advance of
sales, new product decisions must anticipate both the future demand for the type
of semiconductor devices under development by leading semiconductor device
manufacturers and the equipment required to produce semiconductor devices.
GaSonics may not be successful in selecting, developing, manufacturing and
marketing new products or enhancing its existing products. If GaSonics is unable
to offer these products in a competitive manner, its business will be harmed.
Additionally, GaSonics' future performance depends, in part, on the
successful commercialization of its low pressure chemical vapor deposition, or
LPCVD, systems and 300mm systems. However, these products may not lead to
significant revenues or enhance its profitability.
A LIMITED NUMBER OF CUSTOMERS ACCOUNT FOR A SIGNIFICANT PORTION OF GASONICS' NET
SALES, AND THE LOSS OF, OR REDUCTION IN ORDERS FROM, A MAJOR CUSTOMER COULD HARM
ITS BUSINESS.
GaSonics sells a significant proportion of its systems to a limited number
of customers. Sales to its ten largest customers accounted for approximately 75%
of its net sales in the first nine months of fiscal 2000, 69% in fiscal year
1999, 64% in fiscal year 1998 and 66% in fiscal year 1997. In the first nine
months of fiscal 2000, Intel and Motorola each accounted for greater than 10% of
GaSonics' net sales. In fiscal 1999, Intel accounted for greater than 10% of its
net sales. In fiscal 1998, Intel and Motorola each accounted for more than 10%
of its net sales. In fiscal 1997, Samsung, Promos Technologies and Intel each
accounted for more than 10% of net sales. GaSonics expects that a high
percentage of its net sales will continue to come from a limited number of
customers.
GaSonics has no long-term purchase agreements with its customers. If
GaSonics loses a significant customer, its sales could decline and its business
will be harmed. In addition, if sales to some customers decrease or those
customers complete or delay purchasing requirements for new or expanded
fabrication facilities, GaSonics' business could be harmed. For example, Intel
has recently announced a decision to diversify its supplier base and may
decrease its purchases from GaSonics in the future.
GASONICS' LONG AND VARIABLE SALES CYCLE DEPENDS ON MANY FACTORS OUTSIDE OF ITS
CONTROL AND COULD CAUSE GASONICS TO EXPEND SIGNIFICANT TIME AND RESOURCES PRIOR
TO EARNING ASSOCIATED REVENUES.
Sales of GaSonics' systems depend, in part, upon the decision of
prospective customers to increase manufacturing capacity by expanding existing
manufacturing facilities or building new facilities. Because facilitization of
these plants requires significant capital commitment, equipment qualification
and equipment installation, GaSonics often experiences delays in finalizing
these sales following initial system qualification. Due to these and other
factors, GaSonics' systems typically have a lengthy and variable sales cycle
during which GaSonics may expend substantial funds and management effort to
secure final sale and installation of its products.
The length of the sales cycle may increase if customers centralize
purchasing decisions or if they delay purchase decisions in periods of industry
downturns. The lengthy sales cycles may also intensify the evaluation process,
which may increase sales and marketing expenditures, exposing us to risks,
including obsolescence, fluctuations and the resulting difficulties in
forecasting operating results.
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THE COMPLEXITY OF GASONICS' SYSTEMS MAY RESULT IN A SIGNIFICANT DELAY BETWEEN
THE INITIAL INTRODUCTION OF ITS SYSTEMS AND THE COMMENCEMENT OF VOLUME
PRODUCTION.
The large number of components in, and the complexity of, GaSonics' systems
can lead to significant delays between the initial introduction of its systems
and the commencement of volume production. As is typical in the semiconductor
capital equipment market, GaSonics experiences occasional delays in the
introduction of some of its systems and enhancements, and GaSonics may continue
to experience delays in the future. GaSonics has experienced and will continue
to experience technical, quality and manufacturing difficulties with some of its
systems and enhancements. Any delay in the introduction of GaSonics' systems
could cause it to lose revenue, incur substantial expenses and harm its
reputation. In addition, if new products have reliability or quality problems,
GaSonics' operating results will be harmed because of additional expenses, such
as service and warranty expenses.
GASONICS' OPERATIONS ARE CHARACTERIZED BY THE NEED FOR CONTINUED INVESTMENT IN
RESEARCH AND DEVELOPMENT AND, AS A RESULT, ITS ABILITY TO REDUCE COSTS IS
LIMITED.
GaSonics' operations are characterized by the need for continued investment
in research and development. If GaSonics' revenues are below expectations, its
operating results could be harmed because its ability to reduce these costs
while remaining competitive is limited. In addition, because of GaSonics'
emphasis on research and development and technological innovation, there can be
no assurance that its operating costs will not increase in the future. GaSonics
expects the level of research and development expenses to increase in the near
future in absolute dollar terms.
THE SEMICONDUCTOR CAPITAL EQUIPMENT INDUSTRY IS INTENSELY COMPETITIVE, WHICH
COULD IMPAIR SALES OF GASONICS' PRODUCTS AND HARM ITS REVENUES AND RESULTS OF
OPERATIONS.
GaSonics operates in the highly competitive semiconductor capital equipment
industry and face competition from a number of companies, including Eaton
Corporation, Mattson Technology, Plasma Systems and ULVAC, some of which have
greater financial, engineering, manufacturing, marketing and customer support
resources and broader product offerings than it does. As a result, GaSonics'
competitors may be able to respond more quickly to new or emerging technologies
or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of GaSonics' products.
Moreover, there has been significant merger and acquisition activity among
GaSonics' competitors and potential competitors, particularly during the recent
downturn in the semiconductor device and semiconductor capital equipment
industries. These transactions by GaSonics' competitors and potential
competitors may provide them with a competitive advantage over GaSonics by
enabling them to rapidly expand their product offerings and service capabilities
to meet a broader range of customer needs. Many of GaSonics' customers and
potential customers in the semiconductor device manufacturing industry are large
companies that require global support and service for their semiconductor
capital equipment. While GaSonics believes that its global support and service
infrastructure is sufficient to meet the needs of its current customers, future
or existing competitors may have more extensive infrastructures than GaSonics
does, or better infrastructures in particular geographic regions, which could
place GaSonics at a disadvantage when competing for the business of global
semiconductor device manufacturers.
In addition, because GaSonics relies on sales of its dry chemistry
processing equipment, GaSonics may be at a disadvantage to some competitors that
offer more diversified product lines. GaSonics believes that it will continue to
face competition from current and new suppliers employing other technologies,
such as wet chemistry, traditional dry chemistry and other techniques, as those
competitors attempt to extend the capabilities of their existing products.
Furthermore, many of GaSonics' competitors invest heavily in the
development of new systems that will compete directly with GaSonics' systems.
GaSonics expects its competitors in each product area to continue to improve the
design and performance of their products and to introduce new products with
competitive prices and performance characteristics. GaSonics' systems may not be
able compete
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successfully with those of its competitors. Increased competitive pressure has
led and may continue to lead to reduced demand and lower prices for some of its
products, which could harm GaSonics' business.
Competitors of GaSonics' LCD division in Japan include Japan-based
companies and Japan-based joint ventures who manufacture alternative
technologies and are well established in Japan. At any time they could enter
GaSonics' markets with improved technologies or with systems that directly
compete with GaSonics' LCD division.
GASONICS' FUTURE DEPENDS ON ITS ABILITY TO FURTHER PENETRATE THE ASIA/PACIFIC
MARKET, WHICH CONSISTS OF JAPAN, KOREA, SINGAPORE AND TAIWAN.
For the first nine months of fiscal 2000 and for fiscal 1999, the
Asia/Pacific market represented 27% and 26%, respectively, of GaSonics' total
net sales, while the Asia/Pacific market represents 57% of the worldwide
semiconductor capital equipment industry. Some of GaSonics' competitors have
products that are targeted to address the need for low-cost, high-throughput
equipment found in Taiwanese foundries. Some of its competitors also have well
entrenched positions in these markets as a result of long personal
relationships, robust infrastructures and experienced management teams. GaSonics
may not be able to displace its entrenched competitors. As a result, GaSonics'
market share and overall global competitive position may be harmed, and the
future growth of its business may be limited. GaSonics' efforts to further
penetrate these increasingly important Pacific Rim markets may not be
successful.
GASONICS IS DEPENDENT ON INTERNATIONAL SALES AND SUBJECT TO THE RISKS OF
INTERNATIONAL BUSINESS.
International sales accounted for 46% of GaSonics' total net sales for the
first nine months of fiscal 2000 and 46% in fiscal year 1999, 45% in fiscal year
1998 and 55% in fiscal year 1997. As a result of its expanded international
operations, GaSonics anticipates that international sales will continue to
account for a significant portion of its total net sales in the foreseeable
future. These international sales will continue to be subject to a number of
risks, including:
- unexpected changes in regulatory requirements;
- difficulty in satisfying existing regulatory requirements;
- exchange rates;
- foreign currency fluctuations;
- tariffs and other barriers;
- political and economic instability;
- potentially adverse tax consequences;
- outbreaks of hostilities;
- difficulties in accounts receivable collection;
- longer collection cycles;
- difficulties in managing distributors or representatives; and
- difficulties in staffing and managing foreign subsidiary and branch
operations.
GaSonics is also subject to the risks associated with the imposition of
domestic and foreign legislation and regulations relating to the import or
export of semiconductor equipment. GaSonics cannot predict if the import or
export of its products will be subject to tariffs, quotas, duties, taxes or
other charges or restrictions imposed by the United States or any other country
in the future.
In addition, Taiwan accounts for a growing portion of the world's
semiconductor manufacturing. There are currently strained relations between
China and Taiwan. Any adverse development in those relations
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could significantly impact the worldwide production of semiconductors, which
would lead to reduced sales of GaSonics' products and harm its operating
results.
GASONICS IS HIGHLY DEPENDENT ON ITS KEY PERSONNEL AND THEY MAY BE DIFFICULT TO
REPLACE.
GaSonics' success depends to a large extent upon the efforts and abilities
of its key managerial and technical employees. The loss of key employees could
limit GaSonics' ability to develop new products and adapt existing products to
its customers' evolving requirements and result in lost sales and diversion of
management resources. GaSonics has no employment agreements preventing its
officers or key employees from joining its competitors or competing with it.
Furthermore, much of GaSonics' competitive advantage and intellectual property
is based on the expertise, experience and know-how of its key personnel
regarding its technologies, systems and products. If GaSonics is unable to
retain its key personnel, or if any of its key personnel join a competitor or
otherwise compete with it, GaSonics' business and operating results could be
harmed.
GASONICS' FUTURE PERFORMANCE DEPENDS ON ITS ABILITY TO ATTRACT KEY PERSONNEL.
GaSonics' growth depends in part on its ability to attract and retain
qualified management, engineering, financial and accounting, technical,
marketing and sales and support personnel for its operations. Competition for
personnel is intense, particularly in Northern California where GaSonics is
based. GaSonics may not be successful in attracting or retaining personnel,
which could harm its business.
IF GASONICS IS FOUND TO INFRINGE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, ITS
BUSINESS MAY BE HARMED.
As is typical in the semiconductor industry, GaSonics occasionally receives
notices from third parties alleging infringement claims. Although GaSonics has
no significant claims or lawsuits regarding any possible infringement claims
currently filed against it, there can be no assurance that infringement claims
by third parties, or claims for indemnification by GaSonics' customers resulting
from infringement claims, will not be asserted against it in the future. These
assertions, whether or not proven to be true, could harm GaSonics' business.
If any claims are asserted against GaSonics, it may seek to obtain a
license under the third party's intellectual property rights. However, whether
such a license would be available to GaSonics at all, or on terms acceptable to
GaSonics, is unclear. Any license would likely increase its expenses. GaSonics
could also decide to resort to litigation to challenge claims or enforce its
intellectual property rights. Litigation against GaSonics, even if unsuccessful,
could be very expensive and time consuming and could harm its business.
IF GASONICS FAILS TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY RIGHTS, ITS
BUSINESS MAY BE HARMED.
GaSonics attempts to protect its intellectual property rights through
patents, copyrights, trade secrets and other measures. However, there can be no
assurance that GaSonics will be able to protect its technology adequately or
that competitors will not independently develop similar technology. Nor can
GaSonics be sure that any of its pending patent applications will be issued or
that foreign intellectual property laws will protect its intellectual property
rights. GaSonics' issued patents could be challenged, invalidated or
circumvented and the rights granted may not provide GaSonics with competitive
advantages. Furthermore, GaSonics cannot be certain that others will not
independently develop similar products, duplicate its products or design around
its patents or patent applications.
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IF GASONICS ENGAGES IN ACQUISITIONS, IT WILL INCUR A VARIETY OF EXPENSES, AND
MAY NOT BE ABLE TO REALIZE THE ANTICIPATED BENEFITS.
In the future, GaSonics may pursue acquisitions of additional product
lines, technologies or businesses. GaSonics may have to issue debt or equity
securities to pay for future acquisitions, which could be dilutive, and in the
case of debt would have to be repaid, and could harm its business. In addition,
GaSonics has limited experience in the acquisition process. Acquisitions involve
a number of risks, including:
- difficulties in and costs associated with the assimilation of the
operations, technologies, personnel and products of the acquired
companies;
- assumption of known or unknown liabilities or other unanticipated events
or circumstances;
- diversion of management's attention;
- risks of entering markets in which GaSonics has limited or no experience;
and
- potential loss of key employees.
From time to time, GaSonics has engaged in preliminary discussions with
third parties concerning potential acquisitions of product lines, technologies
and businesses. However, there are currently no commitments or agreements with
respect to any acquisitions.
GASONICS PRODUCES A MAJORITY OF ITS PRODUCTS AT A SINGLE FACILITY AND ANY
DISRUPTION IN THE OPERATIONS OF THAT FACILITY COULD HARM ITS BUSINESS.
GaSonics produces most of its products in its manufacturing facility
located in San Jose, California. GaSonics' manufacturing processes are highly
complex and require sophisticated and costly equipment and a specially designed
facility. As a result, any prolonged disruption in the operations of GaSonics'
manufacturing facility, whether due to technical or labor difficulties,
destruction of or damage to this facility as a result of an earthquake, fire or
any other reason, could harm its business, financial condition or results of
operations. Furthermore, San Jose is located on a primary fault line. GaSonics
currently does not have a disaster recovery plan and does not carry sufficient
business interruption insurance to compensate us for losses that may occur.
GASONICS DEPENDS ON A LIMITED NUMBER OF SUPPLIERS FOR PRODUCTS, AND THE LOSS OF
ANY SUPPLIER MAY HARM ITS BUSINESS.
GaSonics purchases a number of components and subassemblies necessary for
manufacturing its systems from a limited number of suppliers and in some
instances a sole supplier. Specifically, GaSonics relies on a limited number of
suppliers for robotics, microwave power supplies and platens, and on single
sources for magnetrons and microwave applicators used in its products. GaSonics'
LCD division in Japan is heavily dependent on a single supplier for quartz
fabrication used in its LPCVD systems.
GaSonics is exploring alternative sources for these critical materials. In
addition, GaSonics has been establishing longer term contracts with some of
these suppliers to mitigate the potential risks of shortages, lack of control
over pricing and delays in delivery of components and subassemblies. However,
GaSonics is also increasingly relying on outside vendors to manufacture
components and subassemblies.
GaSonics' reliance on sole or a limited number of suppliers and its
increasing reliance on subcontractors involve several risks, including
shortages, lack of control over pricing and delays in delivery of components and
subassemblies. Because GaSonics' manufacturing process is typically a complex
process and requires long lead times, there may be delays or shortages caused by
suppliers in the future. Some of GaSonics' suppliers may have relatively limited
financial and other resources, which could impact their ability to deliver
products in a timely manner. Inadequate deliveries or any other circumstance
that would require GaSonics to seek alternative sources of supply or to
manufacture necessary components internally
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could significantly delay shipments, which could damage relationships with
current and prospective customers and harm its business.
A NEW ACCOUNTING PRONOUNCEMENT MAY CAUSE GASONICS' OPERATING RESULTS TO
FLUCTUATE.
In December 1999, the SEC staff released Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements." As a result of this
pronouncement, companies will be required to recognize revenue only when they
substantially complete the applicable sales agreements, which will typically
occur upon customer acceptance. This pronouncement particularly impacts the
semiconductor manufacturing industry and the semiconductor capital equipment
industry. Historically, the industry has recognized revenue upon shipment, and
GaSonics has consistently applied this revenue recognition policy. In compliance
with this pronouncement, GaSonics will adopt the accounting change in revenue
recognition in the near future, which GaSonics expects to have a significant
effect on its operating results in the first fiscal quarter. Furthermore,
adoption of this pronouncement will impact the comparability of GaSonics'
financial statements from period to period, relationships with customers and
internal procedures and controls.
IF GASONICS CANNOT SUCCESSFULLY EXPAND ITS OPERATIONS AND MANAGEMENT SYSTEMS, IT
MAY NOT BE ABLE TO GROW OR MAINTAIN ITS BUSINESS.
Sales growth and expansion in the scope of GaSonics' operations in the past
placed a considerable strain on its operations and management systems. To
effectively deal with changes brought on by the cyclical nature of the industry,
GaSonics may be required to initiate an extensive reevaluation of its operating
and financial systems, procedures and controls. GaSonics will continue to
upgrade and implement new management systems as required. If GaSonics does not
succeed in these efforts, it may not be able to grow or maintain its business,
and its business may be harmed.
GASONICS OFFICERS, DIRECTORS AND RELATED FAMILY MEMBERS CAN CONTROL THE OUTCOME
OF MATTERS REQUIRING STOCKHOLDER APPROVAL.
As of December 7, 2000, GaSonics' officers, directors and members of their
families who may be deemed affiliates of such persons, beneficially owned
approximately % of its outstanding shares of common stock. Accordingly,
these stockholders will be able to significantly influence the election of
GaSonics' directors and the outcome of corporate actions requiring stockholder
approval, such as mergers and acquisitions, regardless of how GaSonics' other
stockholders may vote. Such a high level of ownership by these persons or
entities could have a significant effect in delaying, deferring or preventing a
change in control and may impact the voting power and other rights of other
holders of GaSonics' common stock.
GASONICS' FAILURE TO COMPLY WITH CURRENT OR FUTURE ENVIRONMENTAL REGULATIONS
COULD HARM ITS BUSINESS.
GaSonics is subject to a variety of governmental regulations relating to
the use, storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances used to manufacture its
products. GaSonics believes that it is currently in compliance, in all material
respects, with these regulations and that it has obtained all necessary
environmental permits to conduct its business. Nevertheless, the failure to
comply with current or future regulations could result in substantial fines
being imposed on us, suspension of production, alteration of its manufacturing
process or cessation of operations. These regulations could require GaSonics to
acquire expensive remediation equipment or to incur substantial expenses to
comply with environmental regulations. GaSonics' failure to control the use,
disposal or storage of, or adequately restrict the discharge of, hazardous or
toxic substances could subject it to significant liabilities and could harm its
business.
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FORWARD LOOKING STATEMENTS
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Novellus' and GaSonics' financial conditions, results of
operations and businesses, and on the expected impact of the merger on Novellus'
and GaSonics' financial performance. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
identify forward looking statements. These forward looking statements, which
include statements about the anticipated benefits of the merger, including
enhanced product offerings and increased product innovation; the growth of the
semiconductor industry; increasing costs in the semiconductor industry; market
size, share and demand, product performance; expected operating results,
revenues and earnings and current and potential litigation are not guarantees of
future performance and are subject to risks and uncertainties that could cause
actual results to differ materially from the results contemplated by the forward
looking statements. Some of the factors that may cause actual results to differ
materially from those contemplated by such forward looking statements include,
but are not limited to, the following possibilities:
- combining the businesses of Novellus and GaSonics may cost more than is
currently expected;
- the timing of the completion of the proposed merger may be materially
delayed or prohibited;
- general economic conditions or conditions in securities markets may be
less favorable than currently anticipated;
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- integrating the businesses of Novellus and GaSonics and retaining key
personnel may be more difficult than expected;
- contingencies may arise of which Novellus and GaSonics are not currently
aware or of which Novellus and GaSonics underestimated the significance;
- the combined company's revenues after the merger may be lower than
expected;
- the combined company may lose more business, customers or suppliers after
the merger than Novellus and GaSonics currently expect, or the combined
company's operating costs may be higher than Novellus and GaSonics
currently expect;
- the amount (both in absolute dollars and as a percentage of net sales) of
Novellus' and/or GaSonics' expenditures for research and development,
selling, general and administrative and capital acquisitions and
improvements may be materially greater or less than that currently
expected; or
- development costs, anticipated completion, introduction and projected
revenues from Novellus' and/or GaSonics' new and developing products and
technologies may be materially different than currently anticipated.
Some of these factors and additional risks and uncertainties are further
discussed under "Risk Factors" beginning on page 20. Because such statements are
subject to risks and uncertainties, actual results may differ materially from
those expressed or implied by such statements. GaSonics stockholders are
cautioned not to place undue reliance on such statements, which speak only as of
the date of this proxy statement-prospectus or the date of any document
incorporated by reference.
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THE SPECIAL MEETING OF GASONICS STOCKHOLDERS
PURPOSE OF THE SPECIAL MEETING.
The special meeting is being held so that stockholders of GaSonics may
consider and vote upon a proposal to adopt the Agreement and Plan of
Reorganization, dated as of October 25, 2000, by and among Novellus, Neptune
Acquisition-Sub, Inc. and GaSonics and to transact any other business that
properly comes before the special meeting or any adjournment of the special
meeting. Additionally, GaSonics stockholders may be asked to vote upon a
proposal to adjourn or postpone the special meeting. Any adjournment or
postponement could be used for the purpose of allowing additional time for
soliciting additional votes to adopt the reorganization agreement or to satisfy
other conditions to closing that the parties elect to satisfy prior to the
stockholder vote. Adoption of the reorganization agreement will also constitute
approval of the merger and the other transactions contemplated by the
reorganization agreement.
DATE, TIME AND PLACE; STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING.
The special meeting of GaSonics stockholders will take place on
, 2000 at 9:00 a.m. Pacific Standard Time at the
offices of GaSonics located at 2730 Junction Avenue, San Jose, California
95134-1909. GaSonics' board of directors has fixed the close of business on
December 7, 2000, as the record date for determination of the GaSonics
stockholders entitled to notice of and to vote at the special meeting. On
December 7, 2000, there were shares of GaSonics common stock
outstanding, held by approximately holders of record. The number
of record holders does not include shares held in "street name" through brokers.
VOTE OF GASONICS STOCKHOLDERS REQUIRED FOR ADOPTION OF THE REORGANIZATION
AGREEMENT.
A majority of the outstanding shares of GaSonics common stock entitled to
vote at the special meeting must be represented, either in person or by proxy,
to constitute a quorum at the special meeting. The affirmative vote of the
holders of at least a majority of GaSonics common stock outstanding and entitled
to vote at the special meeting is required to adopt the reorganization
agreement. You are entitled to one vote for each share of GaSonics common stock
held by you on the record date on each proposal to be presented to stockholders
at the special meeting.
As of December 7, 2000, the record date for the special meeting, directors
and executive officers of GaSonics and their affiliates , each of whom has
agreed to approve the merger and adopt the reorganization agreement, held
approximately shares of GaSonics common stock, which represented
approximately % of all outstanding shares of GaSonics common stock entitled
to vote at the special meeting as of December 7, 2000.
PROXIES.
All shares of GaSonics common stock represented by properly executed
proxies that GaSonics receives before or at the special meeting will, unless the
proxies are revoked, be voted in accordance with the instructions indicated
thereon. If no instructions are indicated on a properly executed proxy, the
shares will be voted FOR adoption of the reorganization agreement unless the
shares are held in a brokerage account. In that case, brokers holding shares in
the "street name" may vote the shares only if the stockholder provided
instructions. You are urged to mark the applicable box on the proxy to indicate
how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on adoption of the reorganization agreement, the GaSonics common
stock represented by the proxy will be considered present at the special meeting
for purposes of determining a quorum, but will not be considered to have been
voted in favor of adoption of the reorganization agreement. Similarly, if an
executed proxy is returned by a broker holding shares of GaSonics common stock
in street name which indicates that the broker does not have discretionary
authority to vote on adoption of the reorganization agreement, the shares will
be
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considered present at the meeting for purposes of determining the presence of a
quorum, but will not be considered to have been voted in favor of adoption of
the reorganization agreement. Your broker will vote your shares only if you
provide instructions on how to vote by following the information provided to you
by your broker.
BECAUSE ADOPTION OF THE REORGANIZATION AGREEMENT REQUIRES THE AFFIRMATIVE
VOTE OF AT LEAST A MAJORITY OF THE GASONICS COMMON STOCK OUTSTANDING AS OF THE
RECORD DATE, ABSTENTIONS, FAILURES TO VOTE AND BROKER NON-VOTES WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST ADOPTION OF THE REORGANIZATION AGREEMENT.
GaSonics does not expect that any matter other than adoption of the
reorganization agreement will be brought before the special meeting. If,
however, other matters are properly presented, the persons named as proxies will
vote in accordance with their judgment with respect to those matters, unless
authority to do so is withheld in the proxy.
You may revoke your proxy at any time before it is voted by notifying
GaSonics by:
- writing to Corporate Secretary, GaSonics International Corporation, 404
East Plumeria Drive, San Jose, CA 95134-1912;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
If your broker holds your shares in street name, you must follow directions
received from your broker to change your voting instructions.
GaSonics will bear its own expenses incurred in connection with the
printing and mailing of this proxy statement-prospectus. GaSonics and U.S. Stock
Transfer, GaSonics' transfer agent, will request banks, brokers and other
intermediaries holding shares beneficially owned by others to send this proxy
statement-prospectus to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expenses in so doing.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXIES. A
TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES FOR
GASONICS COMMON STOCK WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER
COMPLETION OF THE MERGER.
SOLICITATION OF PROXIES.
GaSonics will initially pay the costs of soliciting proxies. In addition to
solicitation by mail, GaSonics' directors and officers may solicit proxies by
telephone, facsimile or otherwise. The directors and officers of GaSonics will
not receive compensation for such solicitation but may receive reimbursement by
GaSonics for out-of-pocket expenses incurred in connection with such
solicitation. GaSonics will request that brokerage firms, fiduciaries and other
custodians forward copies of the proxies and this proxy statement-prospectus to
the beneficial owners of shares of GaSonics common stock held of record by them,
and GaSonics will reimburse them for their reasonable expenses incurred in
forwarding such material. In addition, GaSonics may retain the services of a
proxy solicitation firm to solicit proxies, and, if retained, will bear all cost
thereof.
BOARD RECOMMENDATION.
THE GASONICS BOARD OF DIRECTORS HAS APPROVED THE REORGANIZATION AGREEMENT
AND RECOMMENDS THAT GASONICS STOCKHOLDERS VOTE FOR APPROVAL OF THE
REORGANIZATION AGREEMENT. In considering such recommendation, GaSonics
stockholders should be aware that Novellus has agreed to provide certain
indemnification arrangements and may enter into employment arrangements with
certain directors and officers of GaSonics.
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THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF GASONICS. ACCORDINGLY, YOU ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT-PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
This section of the proxy statement-prospectus describes material aspects
of the proposed merger, including the reorganization agreement and the related
agreements. While Novellus and GaSonics believe that the description covers the
material terms of the merger and related transactions, this summary may not
contain all of the information that is important to you. You should read this
entire document and the other documents referred to carefully for a more
complete understanding of the merger. References in this section to "you" or
"your" refer to GaSonics' stockholders.
BACKGROUND OF THE MERGER.
The provisions of the reorganization agreement are the result of arm's
length negotiations conducted among representatives of Novellus and GaSonics.
The following is a summary of the meetings, negotiations and discussions between
the parties that preceded execution of the reorganization agreement.
GENERAL. The following is a description of the existing business
relationship between Novellus and GaSonics and a description of the material
aspects of the proposed merger and related transactions, including the
reorganization agreement and certain other agreements entered into in connection
therewith. While Novellus and GaSonics believe that the following description
covers the material terms of the merger and the related transactions, the
description may not contain all of the information that is important to you. You
should read this entire document and the other documents we refer to carefully
for a more complete understanding of the merger and the related transactions.
THE DAMASCUS ALLIANCE. Novellus and GaSonics met regularly over the past
two years in connection with their membership in the "Damascus Alliance." At
these meetings, the members of the Damascus Alliance, which include Novellus,
GaSonics, Lam Research and SpeedFam-Ipec, discussed product directions,
technology roadmaps, as well as other strategic issues of importance to the
companies and their customers.
THE MERGER. In the first calendar quarter of 1999, several informal
meetings took place between Novellus and GaSonics executive officers. The
purpose of these meetings was to continue general corporate communications
between the companies, to discuss the relative businesses and operations of
Novellus and GaSonics and to discuss a potential business combination of the two
companies. The parties could not reach agreement on the financial terms of a
business combination and these discussions were terminated by the parties in
March, 1999.
On October 1, 2000, Mr. Richard Hill, Chief Executive Officer of Novellus,
phoned Mr. Asuri Raghavan, Chief Executive Officer of GaSonics, and requested a
meeting at Mr. Hill's home. Later that day, Mr. Hill and Mr. Raghavan, met at
Mr. Hill's home to discuss a potential business combination between Novellus and
GaSonics and the general parameters of a valuation of GaSonics.
On October 3, 2000 and October 5, 2000, Mr. Raghavan and Mr. Robert Smith,
Chief Financial Officer of Novellus, discussed by telephone a potential business
combination between Novellus and GaSonics. Also on October 5, 2000, Mr.
Raghavan, Mr. Rammy Rasmussen, Chief Financial Officer of GaSonics, and
representatives of Banc of America Securities LLC discussed the valuation of
GaSonics and the possibility of a business combination between GaSonics and
Novellus.
On October 6, 2000, Mr. Raghavan, Mr. Rasmussen and Mr. Smith met at
Novellus to discuss a potential business combination between Novellus and
GaSonics and the general parameters of a valuation of GaSonics. Also on October
6, 2000, Mr. Raghavan and Mr. Dave Toole, Chairman of the Board of GaSonics, met
to discuss a potential business combination with Novellus and the general
parameters of a valuation of GaSonics.
On October 9, 2000, Novellus provided GaSonics with a preliminary written
proposal for a business combination of Novellus and GaSonics, and Novellus and
GaSonics began focused discussions on the possibility and structure of a
business combination.
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On October 10, 2000, the GaSonics board of directors held a special meeting
at GaSonics' executive offices during which the GaSonics board of directors
discussed the proposed business combination between Novellus and GaSonics. Mr.
Raghavan reviewed the chronology of discussions with Mr. Hill and Mr. Smith
regarding possible business combinations with Novellus. In addition, a
representative from Banc of America Securities reviewed with the GaSonics board
the financial implications and valuation of the proposed business combination at
that time. In addition, representatives of Brobeck, Phleger & Harrison LLP,
outside legal counsel to GaSonics, outlined the board's fiduciary duties and
other applicable legal principles in the context of business combination
transactions. The board of directors of GaSonics discussed the strategic,
business and financial merits with respect to GaSonics and its stockholders and
the timing of a possible transaction with Novellus and the terms of Novellus'
proposal, and directed Mr. Raghavan and management to continue negotiations with
Novellus.
On October 11, 2000, at a meeting at GaSonics' offices, executives of
GaSonics, including Mr. Toole, Mr. Raghavan, and Mr. Rasmussen, representatives
of Banc of America Securities and representatives from Brobeck, Phleger &
Harrison LLP met to discuss the valuation of GaSonics, to evaluate a preliminary
proposal that had been received from Novellus, and to formulate a response to
Novellus' preliminary proposal.
On October 12, 2000 and October 13, 2000, several conference calls were
held between Mr. Raghavan on GaSonics' behalf, and Mr. Smith on Novellus'
behalf, during which the parties discussed the possibility of a potential
combination of the two companies, the valuation of GaSonics, and the possible
structure of the transaction. No agreement on the terms of the potential
combination was reached between the parties.
During the week of October 16, 2000, representatives of GaSonics and
Novellus engaged in telephone discussions regarding the possible terms of a
potential merger between the companies.
On October 18, 2000, Mr. Raghavan on GaSonics' behalf, and Mr. Hill and Mr.
Smith on Novellus' behalf, discussed by telephone the possibility of a potential
business combination between the two companies, the valuation of GaSonics, and
possible structure of the transaction.
On October 19, 2000, the GaSonics board of directors held a special
telephonic meeting during which the GaSonics board of directors discussed the
proposed business combination with Novellus. Mr. Raghavan reviewed the
chronology of various discussions since October 1, 2000 regarding possible
potential business combinations between Novellus and GaSonics, and the valuation
of GaSonics. In addition, a representative from Banc of America Securities
reviewed the financial implications and valuation of the proposed business
combination at that time. In addition, Brobeck, Phleger & Harrison LLP outlined
the board's fiduciary duties and other applicable legal principles in the
context of business combination transactions. The board of directors of GaSonics
discussed the strategic, business and financial merits with respect to GaSonics
and its stockholders and the timing of a possible transaction with Novellus and
the terms of Novellus' proposal, and directed Mr. Raghavan and management to
continue negotiations with Novellus.
Also on October 19, 2000, GaSonics and Novellus had further discussions
regarding a possible business combination and entered into a mutual
non-disclosure agreement with respect to confidential information to be
disclosed by the parties in connection with the proposed business combination,
and representatives from Novellus and Morrison & Foerster LLP, outside counsel
to Novellus, began their due diligence review of GaSonics' operations and
documents.
On the evening of October 20, 2000, Novellus delivered a draft
reorganization agreement and the other transaction documents to GaSonics and
Brobeck, Phleger & Harrison LLP.
On the evening of October 21, 2000, GaSonics and Brobeck, Phleger &
Harrison LLP provided initial comments on the draft reorganization agreement
previously delivered by Novellus.
Between October 19, 2000 through the evening of October 24, 2000, Novellus,
GaSonics, and their respective outside legal counsel, participated in a series
of negotiations on the terms of the reorganization
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agreement and the other related agreements by teleconference. These negotiations
covered all aspects of the transaction, including, among other things, the
representations and warranties made by the parties, the restrictions on the
conduct of their business, the conditions to completion of the proposed merger,
the provisions regarding termination, the details of the "no shop" clause, the
amount, triggers and payment of the termination fees and the consequences of
termination, and the delivery and terms of the voting agreements and irrevocable
proxies, and affiliate letters.
On October 23, 2000, representatives from GaSonics, Novellus, Banc of
America Securities, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Brobeck,
Phleger & Harrison LLP, and Morrison & Foerster, LLP met at the offices of
Morrison & Foerster, LLP to discuss the business operations, strategies, and
financial projections of Novellus and GaSonics, and continue the negotiations of
a proposed business combination between Novellus and GaSonics.
On October 25, 2000, GaSonics entered into an engagement letter with Banc
of America Securities pursuant to which Banc of America Securities was formally
engaged to act as GaSonics' financial advisor in connection with the possible
transaction.
On the morning of October 25, 2000, the GaSonics board of directors held a
special meeting, together with Brobeck, Phleger & Harrison LLP and Banc of
America Securities, at GaSonics' executive offices during which the GaSonics
board of directors discussed the proposed business combination with Novellus and
reviewed the status of negotiations and discussions with Novellus since the
board's October 19, 2000 meeting. Mr. Raghavan reviewed the chronology of the
various discussions since October 19, 2000 regarding a possible business
combination transaction with Novellus, as well as the current status of
negotiations with Novellus. Banc of America Securities reviewed the financial
terms and implications of the proposed transaction and delivered its oral
opinion, subsequently confirmed in writing, to the GaSonics board of directors
that, based upon and subject to various assumptions and limitations set forth in
the opinion, as of October 25, 2000, the exchange ratio of 0.52 of a share of
Novellus common stock to be received for each share of GaSonics common stock
pursuant to the reorganization agreement was fair from a financial point of view
to the holders of GaSonics common stock. For a more detailed discussion of Banc
of America Securities' analysis and opinion, you should review the section
entitled "Consideration of the Merger by GaSonics' Board of Directors -- Opinion
of GaSonics' Financial Advisor" beginning on page 50 of this proxy
statement-prospectus, and the text of Banc of America Securities' opinion
attached to this document as Annex B. In addition, Brobeck, Phleger & Harrison
LLP reviewed with the GaSonics board of directors the main legal principles
applicable to the proposed merger, the board's fiduciary duties and authority in
considering the merger, and other applicable legal principles in the context of
business combination transactions. Brobeck, Phleger & Harrison LLP also reviewed
in detail the principal terms of the proposed reorganization agreement, voting
agreements, affiliate letters, and related agreements and matters, and
summarized the remaining open issues and deal points. The board discussed the
strategic, business and financial merits with respect to GaSonics and its
stockholders and the timing of a possible transaction with Novellus. The
GaSonics board of directors reviewed and discussed the principal issues in the
proposed transaction, and the proposed exchange ratio and merger consideration,
the details of the closing conditions, the details of the parties' termination
rights and termination fees, the voting agreements and GaSonics ability to
consider alternative proposals, and directed outside legal counsel and certain
executives to continue negotiations with Novellus and its outside legal counsel
regarding certain open issues with respect to the reorganization agreement.
On the afternoon of October 25, 2000, the Novellus board of directors held
a special meeting, together with its legal counsel and financial advisor, at
Novellus' executive offices during which certain members of Novellus' board
directors participated by telephone. Mr. Hill reviewed the chronology of various
discussions with GaSonics regarding a possible business combination transaction,
as well as the current status of the negotiations. Merrill Lynch then reviewed
its financial analysis of the proposed business combination. In addition,
Novellus' legal counsel reviewed with Novellus' board the main legal principles
applicable to the proposed merger, the board's fiduciary duties and authority in
considering the merger, and other applicable legal principles in the context of
business combination transactions. Novellus' legal counsel also reviewed in
detail the principal terms of the proposed reorganization agreement, voting
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agreements, affiliate letters, and related agreements and matters, and
summarized the remaining open issues. Novellus' board of directors reviewed and
discussed the principal issues in the proposed transaction, the proposed
exchange ratio and merger consideration, closing conditions, termination rights,
termination fees, the voting agreements, and directed its legal counsel and
certain executives to continue negotiations with GaSonics and Brobeck, Phleger &
Harrison LLP regarding certain open issues with respect to the reorganization
agreement. Novellus' board of directors approved the merger, the reorganization
agreement and the other transactions contemplated thereby and authorized
officers of Novellus to execute, on behalf of Novellus, the reorganization
agreement and such other documents that such officers find necessary or
advisable in their sole discretion, together with any changes, deletions,
additions and alterations such officers approve consistent with the resolutions
of Novellus' board of directors.
On the afternoon of October 25, 2000, the GaSonics board of directors
resumed, without Mr. Van Poppelen, the special telephonic meeting begun earlier
that morning to review final changes to the proposed reorganization agreement
and related agreements. Representatives of Banc of America Securities and
Brobeck, Phleger & Harrison LLP also participated. Brobeck, Phleger & Harrison
LLP reviewed the outcome of the further negotiations with Novellus and responded
to questions by the GaSonics board of directors.
After further deliberation, the GaSonics board of directors:
- determined that the reorganization agreement and merger were advisable,
and fair to and in the best interests of GaSonics and its stockholders;
- approved the merger, the reorganization agreement, the voting agreements,
and the transactions contemplated thereby;
- resolved to recommend that stockholders of GaSonics vote in favor of
adoption and approval of the reorganization agreement and approval of the
merger; and
- resolved to call a special meeting of GaSonics' stockholders to adopt and
approve the reorganization agreement and to approve the merger; and
- authorized the Chief Executive Officer and other senior officers of
GaSonics to execute, on behalf of GaSonics, the reorganization agreement
and such other documents that such officers find necessary or advisable
in their sole discretion, together with any changes, deletions, additions
and alterations such officers approve consistent with the resolutions of
the GaSonics board of directors.
Mr. Van Poppelen did not participate in the vote of the board of directors
with respect to the merger, the reorganization agreement or the other
transactions contemplated thereby.
During the evening of October 25, 2000, Novellus and GaSonics entered into
the reorganization agreement. Also on October 25, 2000, certain stockholders of
GaSonics entered into voting agreements with Novellus, pursuant to which they
agreed to vote their GaSonics shares in favor of adoption and approval of the
reorganization agreement and approval of the merger. In addition, certain
stockholders of GaSonics entered into affiliate agreements with Novellus,
acknowledging the restrictions imposed by the federal securities laws in some
instances on their ability to sell Novellus shares both before and following the
completion of the merger.
On October 25, 2000, a joint press release was issued announcing the
signing of the reorganization agreement.
REASONS FOR THE TRANSACTION.
GaSonics and Novellus are proposing to merge in response to unprecedented
growth in the semiconductor equipment industry and demand for the integrated
circuits that are enabling such growth. GaSonics and Novellus believe that the
merger will allow the companies to better respond to the needs of the integrated
circuit industry and the demands of their customers. GaSonics and Novellus
believe that the
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preparation of the surface of semiconductor devices will become increasingly
important in maintaining high performance as semiconductor devices move towards
smaller feature sizes. Also, because residual contamination from improperly
prepared device surfaces can affect the deposition and adhesion of subsequent
dielectric or metal layers in the semiconductor device, Novellus and GaSonics
believe that surface preparation can also improve yields of semiconductor
devices. Additionally, the transition in the semiconductor industry to low-k
dielectrics could result in a complete change in the processes used to prepare
or strip the surface of the semiconductor device because the processes currently
used by semiconductor manufacturers are potentially incompatible with the low-k
dielectric materials.
GaSonics and Novellus are proposing the merger in response to the above
changes and innovations in the manufacturing of semiconductors and because
Novellus and GaSonics believe that the merged entity will have a greater
advantage in offering comprehensive product lines to semiconductor
manufacturers. Specifically, Novellus and GaSonics believe that the merger would
have the following benefits:
- The merger will enhance product offerings to customers by combining
GaSonics' surface preparation product line with Novellus' deposition
system product line.
- The merger will enable the combined company to more effectively innovate
and rapidly bring products to market.
- The merger will allow the combined company to respond to changes in
semiconductor technology and the needs of semiconductor manufacturers
through a combination of Novellus' engineering resources and GaSonics'
depth of knowledge and market leadership in surface preparation.
- The merger will provide the combined company with the opportunity to
interactively optimize surface preparation and deposition steps in
semiconductor manufacturing to increase overall device performance and to
give the combined entity a major advantage in extending copper and low-k
processes to advanced devices.
Although the companies believe the merger could have the benefits described
above, both companies caution that there can be no assurance that any of these
benefits will be achieved and the failure to achieve one or more of these
benefits may have a material adverse effect on the combined company's business,
results of operations and financial condition. See "Risk Factors" on page 20.
RECOMMENDATION OF GASONICS' BOARD OF DIRECTORS.
AT ITS MEETING ON OCTOBER 25, 2000, THE GASONICS BOARD OF DIRECTORS
DETERMINED THAT THE MERGER IS CONSISTENT WITH AND IN FURTHERANCE OF THE
LONG-TERM BUSINESS STRATEGY OF GASONICS, DETERMINED THAT THE MERGER AND THE
REORGANIZATION AGREEMENT ARE IN THE BEST INTERESTS OF GASONICS AND ITS
STOCKHOLDERS, DETERMINED THAT THE TERMS OF THE REORGANIZATION AGREEMENT AND THE
MERGER ARE FAIR TO GASONICS STOCKHOLDERS, DECLARED THE MERGER ADVISABLE AND
APPROVED THE REORGANIZATION AGREEMENT. ACCORDINGLY, THE GASONICS BOARD OF
DIRECTORS HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE IN FAVOR OF
ADOPTION OF THE REORGANIZATION AGREEMENT.
CONSIDERATION OF THE MERGER BY GASONICS' BOARD OF DIRECTORS.
After careful consideration, the GaSonics board of directors has concluded
that the reorganization agreement and the merger are advisable, and fair to and
in the best interests of GaSonics and its stockholders, and recommends that
GaSonics stockholders adopt and approve the reorganization agreement and approve
the merger. This decision was based upon a number of potential benefits of the
merger that the GaSonics board of directors believes will contribute to the
success of the combined company compared to GaSonics continuing to operate as an
independent business, including the following:
- the GaSonics board's judgment that the two companies have significant
complementary strengths and complementary products, services and
solutions;
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- the GaSonics board's judgment that important advantages will accrue to
the leader of the advanced semiconductor device manufacturing industry
and that in order to achieve and retain this position a company must
offer a complete line of products;
- the potential that Novellus' larger market capitalization, broader suite
of products and services, and historical revenue growth will provide
GaSonics with additional resources to grow and gain market share more
rapidly than GaSonics can grow as an independent company in the rapidly
evolving advanced semiconductor device manufacturing market characterized
by the entrance of an increasing number of large, well capitalized and
well known competitors;
- that based on the price of Novellus common stock at the time the
reorganization agreement was approved by the GaSonics board of directors,
the exchange ratio was at a significant premium over the price of
GaSonics common stock then prevailing in the market, and the further
opportunity for GaSonics' stockholders to participate in the future
growth in value of the combined company as stockholders of Novellus
following the merger;
- the combined company's potential to be a market leader as a single-source
provider in the rapidly developing and highly competitive advanced
semiconductor device manufacturing industry by offering a full line of
products, services and solutions to large, medium and small enterprises;
- the combined company's potential to leverage global presence in sales,
support and alliances through Novellus' extensive sales force, strong
service organization and the combined company's developed customer bases;
- the GaSonics board's judgment that the common stock of the combined
company may be a more valuable currency to finance future acquisitions at
a faster pace and at less dilutive prices than GaSonics could accomplish
with its stock alone; and
- the greater liquidity afforded GaSonics stockholders upon exchange of
their shares of GaSonics common stock for shares of Novellus common
stock, whose shares trade in significantly higher dollar and share
volumes.
In identifying these benefits and evaluating the merger, the GaSonics board
of directors reviewed a number of factors and sources of information, including
the following:
- historical information concerning GaSonics and Novellus and their
respective businesses, financial performance, condition, operations,
technology, management and position in the industry, and information and
evaluations regarding the two companies' strengths, weaknesses and
prospects, both before and after giving effect to the merger;
- the reports and presentations of GaSonics' legal counsel, Brobeck,
Phleger & Harrison LLP, regarding the terms of the transaction, the oral
and written presentations of GaSonics' financial advisor, Banc of America
Securities, and Banc of America Securities' opinion (which is attached to
this document as Annex B) to the effect that, based upon and subject to
various considerations, as of October 25, 2000, the exchange ratio of
0.52 of a share of Novellus common stock to be received for each share of
GaSonics common stock pursuant to the reorganization agreement was fair
from a financial point of view to the holders of GaSonics common stock;
- current financial market conditions and historical market prices,
volatility and trading information for GaSonics common stock and Novellus
common stock, and various factors that might affect the market value of
Novellus common stock in the future;
- the premium represented by the exchange ratio and the premiums paid in
other recent transactions that could be viewed as comparable, and the
negotiations between GaSonics and Novellus relating to the exchange
ratio;
- the limited number of closing conditions and termination rights;
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- the alternatives available to GaSonics and the history of contacts with
other parties concerning their possible interest in a business
combination with GaSonics;
- the terms of the reorganization agreement and related agreements, by
themselves and in comparison to the terms of other transactions, and the
intensive negotiations between Novellus and GaSonics, including their
negotiations relating to the details of the conditions to the parties'
obligations to complete the merger, the details of the "no shop"
restrictions on GaSonics and the scope of GaSonics' fiduciary out from
these restrictions, the parties' termination rights, the termination fee
that GaSonics may be required to pay Novellus in certain circumstances,
and the voting agreements; and
- the conditions to closing the merger, and the provisions of the
reorganization agreement concerning what will, and will not, constitute a
"material adverse effect" allowing a party not to complete the merger.
The GaSonics board of directors also identified and considered a number of
risks and uncertainties in its deliberations concerning the merger, including
the following:
- the fact that the exchange ratio is fixed and will not change with
increases or decreases in the market price of either company's stock
before the closing of the merger, and the possibility that the dollar
value of a share of Novellus stock at the closing of the merger may be
more or less than the dollar value of a share of Novellus stock at the
signing of the reorganization agreement;
- the risk that the potential benefits sought in the merger may not be
fully realized, if at all;
- the possibility that the merger may not be consummated and the effect of
the public announcement of the merger on GaSonics' sales, customer
relations and operating results and GaSonics' ability to attract and
retain key management, marketing and technical personnel;
- the risk that despite the efforts of the combined company, key technical,
marketing and management personnel might not choose to remain employed by
the combined company;
- the risk of market confusion and hesitation and potential delay or
reduction in orders;
- the fact that pursuant to the reorganization agreement, GaSonics is
required to obtain Novellus' consent before it can take a variety of
actions between the signing and the closing of the merger; and
- various other risks associated with the businesses of GaSonics, Novellus
and the combined company and the merger described under the section
entitled "Risk Factors" beginning on page 20 of this proxy
statement-prospectus.
The GaSonics board of directors concluded, however, that many of these
risks could be managed or mitigated by GaSonics or by the combined company or
were unlikely to have a material impact on the merger or the combined company,
and that, overall, the risks, uncertainties, restrictions and potentially
negative factors associated with the merger were outweighed by the potential
benefits of the merger.
The foregoing discussion of information and factors considered and given
weight by the GaSonics board of directors is not intended to be exhaustive. In
view of the variety of factors considered in connection with its evaluation of
the merger, the GaSonics board of directors did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendations.
FOR THE REASONS DISCUSSED ABOVE, THE GASONICS BOARD OF DIRECTORS HAS
APPROVED THE REORGANIZATION AGREEMENT AND THE MERGER AND HAS DETERMINED THAT THE
REORGANIZATION AGREEMENT AND THE MERGER ARE ADVISABLE, AND FAIR TO AND IN THE
BEST INTERESTS OF GASONICS AND ITS STOCKHOLDERS, AND RECOMMENDS THAT GASONICS'
STOCKHOLDERS VOTE TO ADOPT AND APPROVE THE REORGANIZATION AGREEMENT AND APPROVE
THE MERGER.
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OPINION OF GASONICS' FINANCIAL ADVISOR.
In October, 2000 the board of directors of GaSonics retained Banc of
America Securities to act as its financial advisor in connection with the
merger. Banc of America Securities is a nationally recognized investment banking
firm. Banc of America Securities is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
GaSonics selected Banc of America Securities to act as its financial advisor on
the basis of Banc of America Securities' experience and expertise in
transactions similar to the merger, its reputation in the semiconductor industry
and investment community and its historical investment banking relationship with
GaSonics.
Banc of America Securities delivered its written opinion, dated October 25,
2000, to the GaSonics board of directors that the exchange ratio in the merger
was fair from a financial point of view to GaSonics' stockholders as of that
date. Banc of America Securities was not requested to and did not solicit any
expressions of interest from any other parties with respect to the sale of all
or any part of GaSonics or any other alternative transaction. Banc of America
Securities was not requested to and did not provide advice concerning the
structure, the specific amount of the consideration, or any other aspect of the
merger or the transactions contemplated by the reorganization agreement, or to
provide services other than financial advisory services in connection with the
merger and the delivery of its opinion. Banc of America Securities did not
participate in the negotiations of the terms of the merger or the transactions
contemplated by the reorganization agreement, and does not express any opinion
as to whether any alternative transaction might produce consideration for
GaSonics' stockholders in an amount in excess of that contemplated in the
merger.
WE HAVE ATTACHED THE FULL TEXT OF BANC OF AMERICA SECURITIES' WRITTEN
OPINION TO THE GASONICS BOARD OF DIRECTORS AS ANNEX B, WHICH IS INCORPORATED IN
ITS ENTIRETY. YOU SHOULD READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY IN
CONNECTION WITH THIS PROXY STATEMENT-PROSPECTUS. HOWEVER, WE HAVE ALSO INCLUDED
THE FOLLOWING SUMMARY OF BANC OF AMERICA SECURITIES' OPINION, WHICH IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
BANC OF AMERICA SECURITIES' OPINION IS DIRECTED TO THE GASONICS' BOARD OF
DIRECTORS. IT DOES NOT CONSTITUTE A RECOMMENDATION TO YOU ON HOW TO VOTE WITH
RESPECT TO THE MERGER. THE OPINION ADDRESSES ONLY THE FINANCIAL FAIRNESS OF THE
EXCHANGE RATIO TO THE STOCKHOLDERS OF GASONICS. THE OPINION DOES NOT ADDRESS THE
RELATIVE MERITS OF THE MERGER OR ANY ALTERNATIVES TO THE MERGER, THE UNDERLYING
DECISION OF THE GASONICS BOARD OF DIRECTORS TO PROCEED WITH OR EFFECT THE MERGER
OR ANY OTHER ASPECT OF THE MERGER. IN FURNISHING ITS OPINION, BANC OF AMERICA
SECURITIES DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED IN THE SECURITIES ACT, NOR DID IT ADMIT THAT ITS OPINION
CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF THE SECURITIES ACT.
STATEMENTS TO THAT EFFECT ARE INCLUDED IN THE BANC OF AMERICA SECURITIES
OPINION.
Banc of America Securities:
- reviewed publicly available financial statements and other business and
financial information of GaSonics and Novellus;
- discussed the past and current operations, financial condition and
prospects of GaSonics with senior executives of GaSonics;
- discussed with senior executives of GaSonics financial forecasts prepared
by the management of GaSonics;
- reviewed and considered in the analysts' forecasts of the estimated
financial performance of GaSonics published by investment banking firms
that provide research coverage of GaSonics;
- discussed with senior executives of GaSonics information relating to
strategic, financial and operational benefits anticipated from the
merger;
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<PAGE> 59
- reviewed the pro forma impact of the merger on Novellus' earnings per
share, cash flow, consolidated capitalization and financial ratios;
- reviewed information prepared by members of senior management of GaSonics
relating to the relative contributions of GaSonics and Novellus to the
combined company;
- reviewed the reported prices and trading activity for the GaSonics common
stock and the Novellus common stock;
- compared the financial performance of GaSonics and Novellus and the
prices and trading activity of the GaSonics common stock and Novellus
common stock with other publicly traded companies that Banc of America
Securities deemed relevant;
- compared the financial terms of the merger to the corresponding financial
terms, to the extent publicly available, of other business combination
transactions that Banc of America Securities deemed relevant;
- participated in discussions among representatives of GaSonics and
Novellus and their financial and legal advisors;
- reviewed the October 23, 2000 draft reorganization agreement and related
documents; and
- performed other analyses and considered other factors as Banc of America
Securities deemed appropriate.
Banc of America Securities assumed and relied on, without independent
verification, the accuracy and completeness of the financial and other
information reviewed by it for purposes of its opinion. Banc of America
Securities also made the following assumptions:
- with respect to the financial forecasts, including information relating
to strategic, financial and operational benefits anticipated from the
merger, Banc of America Securities assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
good faith judgments of the future performance of GaSonics and Novellus;
- that the terms of the merger and the transactions contemplated by the
reorganization agreement are the most beneficial terms from the
perspective of GaSonics that could under the circumstances be negotiated
among the parties to the merger and the transactions contemplated by the
reorganization agreement;
- that the merger will be treated as a tax-free reorganization and/or
exchange, in accordance with the Internal Revenue Code of 1986, as
amended;
- that the merger will be recorded as a pooling of interests transaction
under generally accepted accounting principles; and
- that the definitive agreement for the merger would be the same as the
October 23, 2000 draft reorganization agreement as modified in various
respects of which Banc of America Securities was informed by Brobeck,
Phleger & Harrison LLP on October 25, 2000 and that the merger will be
consummated as contemplated in such draft reorganization agreement, as so
modified, with full satisfaction of all covenants and conditions and
without any waivers.
GaSonics does not publicly disclose internal management forecasts of the
type discussed with Banc of America Securities by the management of GaSonics in
connection with Banc of America Securities' review of the merger. The forecasts
were not prepared with a view toward public disclosure. In addition, the
forecasts were based on numerous variables and assumptions that are inherently
uncertain, including factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from the
results set forth in the forecasts. Banc of America Securities has assumed no
liability for the forecasts.
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<PAGE> 60
In addition, for purposes of its opinion, Banc of America Securities:
- discussed the forecasts published by investment banking firms with
members of management of GaSonics and they acknowledged Banc of America
Securities' use of the forecasts in arriving at its opinion; and
- did not assume responsibility for making an independent valuation or
appraisal of the assets or liabilities of GaSonics, nor did Banc of
America Securities receive any appraisals.
Banc of America Securities' opinion was based on economic, monetary and
market and other conditions in effect on, and the information made available to
it as of, the date of its opinion. Accordingly, although subsequent developments
may affect its opinion, Banc of America Securities did not assume any obligation
to update, revise or reaffirm its opinion.
The following represents a brief summary of the material financial analyses
performed by Banc of America Securities in connection with providing its opinion
to the GaSonics board of directors. Some of the summaries of financial analyses
performed by Banc of America Securities include information presented in tabular
format. In order to fully understand the financial analyses performed by Banc of
America Securities, you should read the tables together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by Banc of
America Securities.
VALUATION ANALYSIS REGARDING GASONICS.
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to revenues and equity value to net income, each for estimated calendar
year 2000 and projected calendar year 2001, for four companies in the
semiconductor capital equipment industry that Banc of America Securities deemed
to be comparable to GaSonics.
The comparable company analysis compared GaSonics to the four companies in
the semiconductor capital equipment industry on the basis that the companies
selected were the most relevant given the factors considered above.
Consequently, Banc of America Securities did not include every company that
could be deemed to be a participant in the same industry.
Banc of America Securities defined aggregate value to mean:
- equity value, defined as the product of the number of fully diluted
shares of common stock outstanding, based on the treasury method of
calculation and including exercisable options, for a company multiplied
by its stock price; plus
- outstanding funded debt; less
- cash and cash equivalents.
Banc of America Securities calculated multiples for the following four
semiconductor capital equipment manufacturers:
FSI International, Inc.,
Mattson Technology, Inc.,
Semitool, Inc., and
Ultratech Stepper, Inc.
Each company was selected because (a) it had an active public trading
market for its equity securities, (b) was a manufacturer of front-end
semiconductor capital equipment and (c) Banc of America Securities believed the
company had operating characteristics similar to those of GaSonics.
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<PAGE> 61
The following table sets forth multiples indicated by this analysis for
these four companies:
<TABLE>
<CAPTION>
RANGE OF
MULTIPLES MEDIAN MEAN
--------------- ------ -----
<S> <C> <C> <C>
AGGREGATE VALUE TO:
Estimated calendar year 2000 revenues.............. 0.67x to 2.09x 1.00x 1.19x
Projected calendar year 2001 revenues.............. 0.19x to 1.40x 1.10x 0.90x
EQUITY VALUE TO:
Estimated calendar year 2000 net income............ 9.9x to 13.8x 12.2x 12.0x
Projected calendar year 2001 net income............ 7.2x to 9.5x 8.3x 8.3x
</TABLE>
Banc of America Securities noted that the aggregate value of the
consideration to be paid by Novellus to the stockholders of GaSonics in
connection with the merger implied multiples of (a) 1.63x calendar year 2000
revenues, (b) 1.20x calendar year 2001 revenues, (c) 13.5x calendar year 2000
net income and (d) 10.7x calendar year 2001 net income.
Comparable Transactions Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of (a)
aggregate value to the latest twelve months revenues and (b) equity value to the
last twelve months net income based on the most recent financial reporting
period for the target company implied in seventeen semiconductor capital
equipment and materials company acquisitions announced between January 1999 and
October 2000.
Banc of America Securities calculated multiples for the following
comparable company acquisitions:
<TABLE>
<CAPTION>
ACQUIROR TARGET ANNOUNCEMENT DATE
-------- ------ -----------------
<S> <C> <C>
Kulicke and Soffa
Industries Cerprobe Corporation October 12, 2000
MKS Instruments, Inc. Applied Science and Technology, Inc October 2, 2000
ASM Lithography Holding NV Silicon Valley Group, Inc October 2, 2000
MKS Instruments Inc. DIP Inc September 7, 2000
Mattson Technologies, Inc. CFM Technologies, Inc June 28, 2000
Mattson Technologies, Inc. STEAG Electronics Systems AG June 28, 2000
MKS Instruments, Inc. Spectra International, LLC June 27, 2000
IDE Corp. Cybeq Systems April 26, 2000
Veeco Instruments Inc. CVC, Inc February 29, 2000
Veeco Instruments Inc. Monarch Labs, Inc January 28, 2000
Applied Materials, Inc. Etec Systems, Inc January 12, 2000
Photronics, Inc. Align-Rite International, Inc January 10, 2000
Advantest Corp. Asia Electronics (Test Equip. Division) December 24, 1999
Oerlikon-Buhrle Holding AG Plasma-Therm, Inc December 20, 1999
Brooks Automation, Inc. AutoSimulations & AutoSoft Corp September 8, 1999
ATMI, Inc. Delatech Incorporated June 1, 1999
Applied Materials, Inc. Obsidian May 28, 1999
</TABLE>
Each transaction was selected because:
- Banc of America Securities believed the target company had similar
operating characteristics to those of GaSonics; and
- The transaction was relatively recent and the target company was of a
comparable size to GaSonics in terms of aggregate value and equity value.
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<PAGE> 62
The following table sets forth the multiples indicated by this analysis for
these seventeen acquisitions:
<TABLE>
<CAPTION>
RANGE OF
MULTIPLES MEDIAN MEAN
--------------- ------ -----
<S> <C> <C> <C>
AGGREGATE VALUE TO:
Latest twelve months revenues....................... 1.48x to 3.83x 2.39x 2.59x
EQUITY VALUE TO:
Latest twelve months net income..................... 20.6x to 47.6x 34.6x 34.4x
</TABLE>
The comparable transactions analysis compared the merger to the seventeen
acquisitions of semiconductor capital equipment companies on the basis that the
transactions selected were the most relevant given the factors considered above.
Consequently, Banc of America Securities did not include every transaction that
could be deemed to have occurred in the relevant industries.
Banc of America Securities noted that aggregate value of GaSonics implied
by the merger yielded multiples of (a) 2.52x latest twelve months revenues and
(b) 31.7x latest twelve months net income.
No company or transaction used in the comparable company or comparable
transactions analyses is identical to GaSonics, Novellus or the merger.
Accordingly, an analysis of the foregoing results is not mathematical. Rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies or the transactions to
which GaSonics, Novellus and the merger are being compared.
Premiums Paid Analysis. Banc of America Securities reviewed the
consideration offered in 72 merger and acquisition transactions announced
between January 2000 and October 2000 involving companies in the technology
industry. Banc of America Securities calculated the premiums offered relative to
the stock prices of the acquired companies one day, one week and four weeks
before the announcement of the acquisition offer.
This analysis indicated the following median and mean premiums:
<TABLE>
<CAPTION>
PREMIUM ONE DAY PREMIUM ONE WEEK PREMIUM FOUR WEEKS
BEFORE ANNOUNCEMENT BEFORE ANNOUNCEMENT BEFORE ANNOUNCEMENT
------------------- ------------------- -------------------
<S> <C> <C> <C>
Median...................... 35.7% 37.8% 49.9%
Mean........................ 36.6% 37.6% 53.6%
</TABLE>
Banc of America Securities noted that the per share value of the stock
consideration to be received by GaSonics stockholders in connection with the
merger implied a premium of 35.8% over GaSonics' closing stock price on October
23, 2000. The premiums implied by the merger over GaSonics' closing stock price
one week before October 25, 2000 was 97.9% and four weeks before that date was
65.6%.
Contribution Analysis. Banc of America Securities used the estimates and
forecasts for GaSonics and Novellus based on Wall Street research estimates to
review the estimated contribution of each company to the (a) revenue, (b) EBIT
and (c) net income for each of (1) the latest twelve months, (2) estimated
calendar year 2000 and (3) projected calendar year 2001, for the combined
company. This analysis did not take into account any potential synergies
following completion of the merger.
This analysis indicated that GaSonics would contribute:
<TABLE>
<CAPTION>
ON A LATEST ON AN ESTIMATED ON A PROJECTED
TWELVE MONTHS CALENDAR YEAR CALENDAR YEAR
BASIS 2000 BASIS 2001 BASIS
------------- --------------- --------------
<S> <C> <C> <C>
CONTRIBUTION TO:
Revenues................................. 9.9% 11.9% 11.7%
EBIT..................................... 3.3% 6.5% 7.5%
Net income............................... 4.5% 7.8% 7.4%
</TABLE>
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<PAGE> 63
Banc of America Securities then compared the contributions to the pro forma
share ownership of the combined company to be owned by each company's
stockholders, assuming the merger was completed under the terms of the October
23, 2000 draft definitive agreement. On a pro forma basis, GaSonics stockholders
would own approximately 6.7% of the combined company on a fully diluted basis.
Exchange Ratio Analysis. Banc of America Securities reviewed the historical
ratio of closing price per share of GaSonics common stock to that of Novellus
common stock for several time periods during the one-year period from October
26, 1999 to October 24, 2000. During this period, the historical exchange ratio
calculated on a daily basis had an average of .5235x with a range from a low of
.2539x to a high of .8091x.
The average exchange ratios for selected time periods during the last year
were:
<TABLE>
<CAPTION>
AVERAGE
TIME PERIOD BEFORE 10/25/00 EXCHANGE RATIO
--------------------------- --------------
<S> <C>
3 months...................................... .3420x
6 months...................................... .4625x
9 months...................................... .5177x
12 months...................................... .5235x
</TABLE>
Accretion/Dilution Analysis. Using financial forecasts and assuming no
synergy projections of GaSonics and Novellus based on Wall Street research, Banc
of America Securities reviewed the pro forma effects of the merger, including a
comparison of estimated earnings per share on a stand-alone basis for Novellus
to the estimated earnings per share of the combined company for calendar year
2001.
Banc of America Securities noted that, based on (a) Wall Street research
and (b) assuming completion of the merger under the terms of the October 23,
2000 draft definitive agreement, the accretion to Novellus' earnings per share
would be:
<TABLE>
<CAPTION>
ACCRETION (DILUTION) TO
NOVELLUS SYSTEMS'
CALENDAR YEAR EARNINGS PER SHARE
------------- -----------------------
<S> <C>
2001..................................... 1.1%
</TABLE>
VALUATION ANALYSIS REGARDING NOVELLUS.
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to revenues and equity value to net income, each for estimated calendar
year 2000 and projected calendar year 2001, for four companies in the
semiconductor capital equipment industry that Banc of America Securities deemed
to be comparable to Novellus.
The comparable company analysis compared Novellus to the four large-cap
companies in the semiconductor capital equipment industry on the basis that the
companies selected were the most relevant given the factors considered above.
Consequently, Banc of America Securities did not include every company that
could be deemed to be a participant in the same industry.
Banc of America Securities calculated multiples for the following four
large-cap semiconductor capital equipment manufacturers:
Applied Materials, Inc.,
ASM Lithography Holding,
KLA-Tencor Corporation, and
Teradyne, Inc.
Each company was selected because (a) it had an active public trading
market for its equity securities, (b) was a manufacturer of semiconductor
capital equipment and (c) Banc of America Securities believed the company had
operating characteristics similar to those of Novellus.
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<PAGE> 64
The following table sets forth multiples indicated by this analysis for
these four companies:
<TABLE>
<CAPTION>
RANGE OF
MULTIPLES MEDIAN MEAN
--------------- ------ -----
<S> <C> <C> <C>
AGGREGATE VALUE TO:
Estimated calendar year 2000 revenues.............. 1.51x to 10.10x 3.00x 4.40x
Projected calendar year 2001 revenues.............. 1.24x to 5.88x 2.44x 3.00x
EQUITY VALUE TO:
Estimated calendar year 2000 net income............ 9.4x to 35.6x 17.4x 19.9x
Projected calendar year 2001 net income............ 7.2x to 21.5x 13.8x 14.1x
</TABLE>
Banc of America Securities noted that based on the closing price of
Novellus' stock on October 24, 2000, the aggregate and equity value of Novellus
implied a multiple of (a) 3.04x calendar year 2000 revenues, (b) 2.20x calendar
year 2001 revenues, (c) 16.8x calendar year 2000 net income and (d) 12.2x
calendar year 2001 net income.
As noted above, the discussion above is merely a summary of the analyses
and examinations that Banc of America Securities considered to be material to
its opinion. It is not a comprehensive description of all analyses and
examinations actually conducted by Banc of America Securities. The preparation
of a fairness opinion is not susceptible to partial analysis or summary
description. Banc of America Securities believes that its analyses and the
summary above must be considered as a whole. Banc of America Securities further
believes that selecting portions of its analyses and the factors considered,
without considering all analyses and factors, would create an incomplete view of
the process underlying the analyses set forth in its presentation to the
GaSonics board of directors. Banc of America Securities did not assign any
specific weight to any of the analyses described above. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that that analysis was given greater weight than any other analysis.
Accordingly, the ranges of valuations resulting from any particular analysis
described above should not be taken to be Banc of America Securities' view of
the actual value of GaSonics.
In performing its analyses, Banc of America Securities made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of GaSonics
and Novellus. The analyses performed by Banc of America Securities are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by these analyses.
These analyses were prepared solely as part of Banc of America Securities'
analysis of the financial fairness of the exchange ratio to GaSonics'
stockholders and were provided to the GaSonics board of directors in connection
with the delivery of Banc of America Securities' opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities have traded or may trade
at any time in the future.
As described above, Banc of America Securities' opinion and presentation to
the GaSonics board of directors were among the many factors taken into
consideration by the GaSonics board of directors in making its determination to
approve the merger, and to recommend that GaSonics' stockholders approve the
reorganization agreement.
GaSonics agreed to pay Banc of America Securities a fee of $3,500,000 of
which (a) $750,000 was payable on the date Banc of America Securities was
prepared to render its opinion relating to the merger, (b) $750,000 is payable
upon the mailing of a proxy statement relating to the merger and (c) $2,000,000
is payable upon consummation of the merger. The board of directors was aware of
this fee structure and took it into account in considering Banc of America
Securities' fairness opinion and in approving the merger. The engagement letter
calls for GaSonics to reimburse Banc of America Securities for its reasonable
out-of-pocket expenses, and GaSonics has agreed to indemnify Banc of America
Securities, its affiliates, and their respective partners, directors, officers,
agents, consultants, employees and controlling persons against particular
liabilities, including liabilities under the federal securities laws.
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<PAGE> 65
In the ordinary course of its business, Banc of America Securities or its
affiliates actively trade the debt and equity securities of GaSonics and
Novellus for their own account and for the accounts of customers. Accordingly,
Banc of America Securities or its affiliates may at any time hold a long or
short position in those securities. Banc of America Securities also acted as
underwriter in connection with public offerings of GaSonics' securities, and it
has performed various investment banking services for GaSonics and Novellus.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS OF GASONICS IN THE MERGER.
In considering the recommendation of the GaSonics board of directors, you
should be aware that members of GaSonics' management and of the GaSonics board
of directors have interests in the merger that are different from, or in
addition to, the interests of the GaSonics stockholders generally. The members
of the GaSonics board of directors knew about these additional interests and
considered them when they approved the reorganization agreement.
Specifically, the directors and officers of GaSonics participate in
arrangements and have continuing indemnification against liabilities that
provide them with interests in the merger that are different from, or in
addition to, yours, including the following:
- as of December 7, 2000, the executive officers and directors of GaSonics
owned stock options to purchase an aggregate of shares of
GaSonics common stock, of which are unvested. If the
merger is completed, approximately of the unvested options
will accelerate and become immediately exercisable;
- as of December 7, 2000, directors and officers and their affiliates, who
beneficially own approximately % of GaSonics common stock, have
agreed to vote in favor of the merger;
- certain officers of GaSonics are entitled to certain benefits, including
substantial severance packages, under their employment agreements with
GaSonics if their employment is terminated in connection with or upon
GaSonics' change of control, such as the merger;
- one of the current directors of GaSonics was a director of Novellus until
April 1998 and is also a current Novellus shareholder;
- certain other directors of GaSonics hold shares of Novellus common stock;
- upon completion of the merger, Novellus or GaSonics may enter into
employment arrangements with some of the executive officers of GaSonics
which, among other things, will enable such executive officers to
continue to vest in options granted to them by GaSonics prior to the
merger; and
- Novellus has agreed to, and to cause the surviving corporation in the
merger to, indemnify each present and former GaSonics officer and
director, for six years in some cases and four years after the merger in
other cases, against liabilities arising out of such person's services as
an officer or director of GaSonics. Novellus will, and will cause the
surviving corporation to, maintain officers' and directors' liability
insurance to cover any such liabilities for the next six years after the
merger for certain liabilities and four years in the case of all other
liabilities.
The directors and officers of GaSonics may therefore be more likely to vote
to approve the reorganization agreement and the merger than if they did not have
these interests.
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE. The reorganization
agreement provides that Novellus will, following the merger, indemnify each
current and former director and officer of GaSonics or any of its subsidiaries
to the extent provided in GaSonics' current certificate of incorporation, bylaws
or existing indemnification agreements.
The reorganization agreement further provides that, for a period of not
less than (x) six years, in the case of certain acts and omissions, and (y) four
years, for all other acts or omissions, after the effective time of the merger,
Novellus will, and will cause GaSonics as the surviving corporation in the
merger to,
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<PAGE> 66
indemnify and hold harmless the present and former officers, directors,
employees and agents of GaSonics in respect of acts or omissions occurring on or
prior to the effective time of the merger to the extent provided for under
GaSonics' certificate of incorporation and bylaws and existing indemnification
agreements, subject to any limitation imposed from time to time under applicable
law.
For (x) six years, in the case of certain acts and omissions, and (y) four
years, for all other acts or omissions after the effective time of the merger,
Novellus will, and will cause GaSonics as the surviving corporation in the
merger to, use its best efforts to provide officers' and directors' liability
insurance in respect of acts or omissions occurring on or prior to the effective
time of the merger covering each such person currently covered by GaSonics'
officers' and directors' liability insurance policy on terms at least as
favorable as the coverage currently in effect on the date hereof. Novellus will
not be obligated to cause the surviving corporation to pay premiums in excess of
150% of the amount per annum GaSonics paid in its last full fiscal year. If the
surviving corporation is unable to obtain the required insurance without paying
more than that, it will obtain as much comparable insurance as possible at that
cost.
For a period of (x) six years, in the case of certain acts and omissions,
and (y) four years, for all other acts or omissions, after the effective time,
to the extent there is any claim, action, suit, proceeding or investigation
(whether commencing before or after the effective time) against or involving any
indemnified party that arises out of or pertains to any action or omission (or
alleged action or omission) in his or her capacity as a director, officer,
employee, or agent of GaSonics which act omission occurred prior to the
effective time, Novellus will, and will cause the surviving corporation to,
provide legal counsel and to defend the indemnified party and to pay the
reasonable fees and expenses of counsel.
Novellus will also pay all expenses, including reasonable attorneys' fees,
that may be incurred by any Indemnified Party in enforcing the indemnity and
other obligations provided for in the reorganization agreement to the extent
that the indemnified party is determined to be entitled to indemnification under
the reorganization agreement.
COMPLETION AND EFFECTIVENESS OF THE MERGER.
Novellus and GaSonics will complete the merger when all of the conditions
to completion of the merger are satisfied or waived, including adoption of the
reorganization agreement by the stockholders of GaSonics. The merger will become
effective on the filing of a certificate of merger with the State of Delaware.
Novellus and GaSonics are working towards completing the merger as quickly as
reasonably possible.
STRUCTURE OF THE MERGER AND CONVERSION OF GASONICS COMMON STOCK.
In accordance with the reorganization agreement and Delaware law, Neptune
Acquisition-Sub, Inc. will merge with and into GaSonics. As a result of the
merger, the separate corporate existence of Neptune Acquisition-Sub, Inc. will
cease and GaSonics will survive the merger as a wholly-owned subsidiary of
Novellus.
Upon completion of the merger, each outstanding share of GaSonics common
stock, other than shares held by Novellus and its subsidiaries, will be
converted into the right to receive 0.52 of a fully paid and nonassessable share
of Novellus common stock. The number of shares of Novellus common stock issuable
in the merger will be proportionately adjusted for any stock split, reverse
stock split, stock dividend, recapitalization, redenomination of share capital
or other similar transactions with respect to GaSonics common stock or Novellus
common stock that takes place between the date of the reorganization agreement
and the completion of the merger.
No certificate or scrip representing fractional shares of Novellus common
stock will be issued in connection with the merger. Instead of a fraction of a
share you will receive an amount of cash, without interest, equal to the product
of (x) such fraction, multiplied by (y) the average closing price per share of
Novellus' common stock as quoted on The Nasdaq National Market for the 20
trading days ending on the day which is two
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<PAGE> 67
trading days before the closing date of the merger, less any amount required to
be withheld under foreign, federal, state or local tax laws.
EXCHANGE OF GASONICS STOCK CERTIFICATES FOR NOVELLUS STOCK CERTIFICATES.
When the merger is completed, Novellus' exchange agent will mail you a
letter of transmittal and instructions for surrendering your GaSonics stock
certificates in exchange for Novellus stock certificates. When you deliver your
GaSonics stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your GaSonics stock
certificates will be canceled and you will receive Novellus stock certificates
representing the number of full shares of Novellus common stock to which you are
entitled under the reorganization agreement. You will receive payment in cash,
without interest, instead of any fractional shares of Novellus common stock
which you would otherwise have received.
YOU SHOULD NOT SUBMIT GASONICS STOCK CERTIFICATES FOR EXCHANGE UNLESS AND
UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
You will not be entitled to receive any dividends or other distributions on
Novellus common stock until the merger is completed and you have surrendered
GaSonics stock certificates to the exchange agent in exchange for Novellus stock
certificates.
If there is any dividend or other distribution on Novellus common stock
with a record date after the merger and a payment date prior to the date you
surrender your GaSonics stock certificates in exchange for Novellus stock
certificates, promptly after your shares of Novellus common stock are issued you
will receive the distribution or dividend on those shares. If there is any
dividend or other distribution on Novellus common stock with a record date after
the merger and a payment date after the date you surrender your GaSonics stock
certificates in exchange for Novellus stock certificates, you will receive the
distribution or dividend on your shares promptly after the payment date.
Novellus will only issue a Novellus stock certificate or a check in lieu of
a fractional share in a different name than the name in which a surrendered
GaSonics stock certificate is registered if you present the exchange agent with
all documents required to show and effect the unrecorded transfer of ownership
and show that you paid any applicable stock transfer taxes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.
In the opinion of Morrison & Foerster LLP and Brobeck, Phleger & Harrison
LLP, the following are the material United States federal income tax
consequences of the merger to the GaSonics stockholders, Novellus, GaSonics and
Neptune Acquisition-Sub, Inc., assuming that the merger is effected as described
in the reorganization agreement and this proxy statement-prospectus. These
opinions and the following discussion are based on and subject to the Internal
Revenue Code of 1986, as amended, the regulations promulgated under the Internal
Revenue Code, existing administrative interpretations and court decisions, all
of which are subject to change, possibly with retroactive effect. This
discussion does not address all aspects of United States federal income taxation
that may be important to you in light of your particular circumstances or if you
are subject to special rules, such as rules relating to:
- stockholders who are neither citizens nor residents of the United States
or that are foreign corporations, foreign partnerships or foreign estates
or trusts;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- stockholders who acquired their shares of GaSonics common stock pursuant
to the exercise of options or similar derivative securities or otherwise
as compensation; and
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- stockholders who hold their shares of GaSonics common stock as part of a
hedge, straddle or other risk reduction, constructive sale or conversion
transaction.
This discussion also assumes you hold your shares of GaSonics common stock as
capital assets within the meaning of Section 1221 of the Internal Revenue Code.
Furthermore, this discussion does not address the tax consequences of
transactions effectuated prior or subsequent to the merger (whether or not any
such transactions are undertaken in connection with the merger), including
without limitation the tax consequences of the assumption by Novellus of
outstanding options to acquire GaSonics stock.
It is intended that the merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code and that for federal income tax
purposes no gain or loss will be recognized by Novellus, GaSonics or Neptune
Acquisition-Sub, Inc. solely as a result of the merger. Novellus' and GaSonics'
obligations to complete the merger are conditioned on, among other things,
Novellus' receipt of an opinion dated as of the completion of the merger from
Morrison & Foerster LLP and GaSonics' receipt of an opinion dated as of the
completion of the merger from Brobeck, Phleger & Harrison LLP, in each case
stating that the merger will constitute a tax-free "reorganization" under
Section 368(a) of the Internal Revenue Code and that each of Novellus, GaSonics
and Neptune Acquisition-Sub, Inc. will be a "party to a reorganization" under
Section 368(b) of the Internal Revenue Code. The opinions of counsel to be
provided at the completion of the merger will be based on then existing law,
will assume the absence of changes in existing facts and will rely on customary
assumptions and representations, including those contained in certificates
executed by officers of Novellus and GaSonics and dated on or before the
completion of the merger, which shall not have been withdrawn or modified in any
material respect as of the effective time of the merger. The opinions will
neither bind the Internal Revenue Service (the "IRS") nor preclude the IRS from
adopting a contrary position, and it is possible that the IRS may successfully
assert a contrary position in litigation or other proceedings. Neither Novellus
nor GaSonics intends to obtain a ruling from the IRS with respect to the tax
consequences of the merger.
Assuming the merger qualifies as a "reorganization," the following tax
consequences will result to you if you are a GaSonics stockholder:
- Except as discussed below with respect to fractional shares, you will not
recognize gain or loss for United States federal income tax purposes when
you exchange your GaSonics common stock for Novellus common stock
pursuant to the merger.
- The aggregate tax basis of the Novellus common stock you receive as a
result of the merger will be the same as your aggregate tax basis in the
GaSonics common stock you surrender in exchange for the Novellus common
stock, reduced by any amount of such tax basis that is allocable to a
fractional share interest in GaSonics common stock for which you receive
cash instead of a fractional share of Novellus common stock.
- The holding period of the Novellus common stock you receive as a result
of the exchange will include the holding period of the GaSonics common
stock you exchange in the merger.
- If you receive cash in the merger instead of a fractional share interest
in Novellus common stock, you will be treated as having received the cash
in redemption of the fractional share interest. Assuming that,
immediately after the merger, you hold a minimal interest in Novellus,
you exercise no control over Novellus and, as a result of the deemed
redemption and after giving effect to certain constructive ownership
rules, you experience an actual reduction in your interest in Novellus,
you will recognize capital gain or loss on the deemed redemption in an
amount equal to the difference between the amount of cash received and
your adjusted tax basis allocable to such fractional share. Otherwise,
the cash payment may be taxable to you as a dividend. Any capital gain or
loss will be long-term capital gain or loss if you have held your shares
of GaSonics common stock for more than one year at the time the merger is
completed. Long-term capital gain of a non-corporate United States
shareholder is generally subject to a maximum tax rate of 20%.
None of Novellus, GaSonics or Neptune Acquisition-Sub, Inc. will recognize gain
or loss for United States federal income tax purposes solely as a result of the
merger.
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THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OR
ANY OTHER CONSEQUENCES OF THE MERGER. IN ADDITION, THE DISCUSSION DOES NOT
ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, YOUR
INDIVIDUAL CIRCUMSTANCES. MOREOVER, THE DISCUSSION DOES NOT ADDRESS ANY
NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER.
ACCORDINGLY, YOU ARE STRONGLY URGED TO CONSULT WITH YOUR TAX ADVISOR TO
DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME
OR OTHER TAX CONSEQUENCES TO YOU OF THE MERGER.
ACCOUNTING TREATMENT OF THE MERGER.
Novellus intends to account for the merger with GaSonics as the accounting
acquirer in a pooling-of-interests business combination for financial reporting
and accounting purposes, under generally accepted accounting principles. After
the merger, the results of operations of GaSonics will be included in the
consolidated financial statements of Novellus.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER.
The merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, which prevents reportable transactions from
being completed until statutory waiting periods expire or are terminated. During
such waiting periods, the United States Antitrust Division of the United States
Department of Justice or the United States Federal Trade Commission may request
the parties to provide, voluntarily or otherwise, certain information relevant
to their review. Novellus and GaSonics have made the required filings with the
United States Department of Justice and the United States Federal Trade
Commission and the applicable waiting periods have not yet expired. The
requirements of Hart-Scott-Rodino will be satisfied if the merger is completed
within one year from the termination of the waiting period. Novellus and
GaSonics also will make all required filings with any applicable foreign
regulatory agency or governmental entity in connection with the merger, if
necessary and applicable.
During or after the statutory waiting periods, and even after completion of
the merger, either the Antitrust Division of the United States Department of
Justice or the United States Federal Trade Commission, could challenge or seek
to block the merger under the antitrust laws, as it deems necessary or desirable
in the public interest. Other foreign competition agencies with jurisdiction
over the merger could also initiate action to challenge or block the merger. In
addition, a competitor, customer or other third party could initiate a private
action under the antitrust laws challenging or seeking to enjoin the merger,
before or after it is completed. Novellus and GaSonics cannot be sure that a
challenge to the merger will not be made or that, if a challenge is made,
Novellus and GaSonics will prevail.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF GASONICS AND NOVELLUS.
The shares of Novellus common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933, as amended, and will
be freely transferable under the Securities Act, except for shares of Novellus
common stock issued to any person who is deemed to be an affiliate of either
Novellus or GaSonics at the time of the GaSonics special meeting. Persons who
may be deemed to be affiliates include individuals or entities that control, are
controlled by, or are under common control of either Novellus or GaSonics and
include their officers and directors, as well as some of their principal
stockholders. All affiliates of GaSonics and Novellus will enter into affiliate
agreements in connection with the merger. See "Affiliates Agreements and
Restrictions on the Ability to Sell Novellus Stock" on page 73. GaSonics'
affiliates may not sell their shares of Novellus common stock acquired in
connection with the merger except under:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
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Novellus' registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, does not cover the resale of shares of
Novellus common stock to be received by affiliates in the merger.
Further, in connection with the accounting for the merger as a
pooling-of-interests, both GaSonics and Novellus affiliates may not, within the
30 days preceding the effective time of the merger, sell, transfer or otherwise
dispose of or reduce their risk relative to any shares of Novellus common stock
beneficially owned by them and transfer any Novellus common stock received by
them in the merger until after such time as financial results covering at least
30 days of combined operations of Novellus and GaSonics have been published by
Novellus in the form of an effective registration statement filed with the
Securities Exchange Commission, a quarterly or annual report on Form 10-Q, 10-K
or 8-K, or any other public filing or announcement which includes such combined
results of operations.
LISTING ON THE NASDAQ NATIONAL MARKET OF NOVELLUS COMMON STOCK TO BE ISSUED IN
THE MERGER.
Under the reorganization agreement, Novellus shall cause the shares of
Novellus common stock to be issued in the merger to be listed on The Nasdaq
National Market.
NO APPRAISAL RIGHTS.
You are not entitled to exercise dissenters' or appraisal rights as a
result of the merger or to demand payment for your shares under Delaware or
other applicable law.
DIVIDEND POLICY.
Neither GaSonics nor Novellus has ever paid a cash dividend on its common
stock since their respective inceptions and neither anticipates paying any cash
dividends in the foreseeable future.
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THE REORGANIZATION AGREEMENT
The following describes certain aspects of the proposed merger, including
material provisions of the reorganization agreement. The following description
of the reorganization agreement does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the reorganization agreement,
which is attached as Annex A to this proxy statement-prospectus and is
incorporated in this proxy statement-prospectus by reference. All Novellus
shareholders and GaSonics stockholders are urged to read the reorganization
agreement carefully and in its entirety.
THE MERGER.
At the closing of the merger, Neptune Acquisition-Sub, Inc., a wholly-owned
subsidiary of Novellus, will merge with and into GaSonics. As a result of the
merger, GaSonics will become a wholly-owned subsidiary of Novellus. The merger
is expected to be accounted for as a pooling-of-interests for accounting and
financial reporting purposes and is intended to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
for federal income tax purposes.
CLOSING AND EFFECTIVE TIME OF THE MERGER.
The reorganization agreement provides that the closing will take place as
soon as practicable, but no later than two business days, after the satisfaction
or waiver of the conditions to the merger contained in the reorganization
agreement, unless some other time or date is agreed to by Novellus and GaSonics.
On the closing date, the parties will file a certificate of merger executed in
accordance with the relevant provisions of Delaware law.
CONVERSION OF SECURITIES.
Each share of GaSonics common stock issued and outstanding immediately
before the effective time of the merger will automatically convert into the
right to receive 0.52 of a share of Novellus common stock. Novellus will not
issue any fractional shares. Instead of a fraction of a share, GaSonics'
stockholders will receive an amount of cash, without interest, equal to the
product of (x) such fraction, multiplied by (y) the average closing price per
share of Novellus' common stock as quoted on The Nasdaq National Market for the
20 trading days ending on the day which is two trading days before the closing
date of the merger, less any amount required to be withheld under foreign,
federal, state or local tax laws.
REPRESENTATIONS AND WARRANTIES.
Novellus and GaSonics each made a number of customary representations and
warranties in the reorganization agreement regarding aspects of their respective
businesses, financial condition, structure and other facts pertinent to the
merger.
REPRESENTATIONS AND WARRANTIES OF GASONICS. The representations given by
GaSonics cover the following topics, among others, as they relate to GaSonics
and its subsidiaries:
- corporate organization and its qualification to do business;
- capital structure;
- authorization of the reorganization agreement;
- that the transactions contemplated by the merger will not result in a
violation of GaSonics' organizational documents, laws or material
contracts;
- material third party consents and regulatory approvals necessary to
complete the merger;
- filings and reports with the SEC and financial statements;
- the absence of material changes, events or effects;
- the absence of undisclosed liabilities;
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- litigation;
- governmental authorizations;
- title to personal properties and absence of liens;
- intellectual property;
- environmental matters and applicable environmental laws;
- taxes;
- employee benefit plans, employment agreements and other employee and
labor matters;
- insurance;
- compliance with applicable laws;
- brokers' and finders' fees;
- affiliate and voting agreements;
- required stockholder vote;
- registration statement and proxy statement;
- customers and suppliers;
- material contracts, breaches of material contracts and third party
consents under material contracts;
- real property;
- tax matters;
- board actions approving the reorganization agreement and recommendation
of approval by stockholders; and
- the opinion of GaSonics' financial advisor.
REPRESENTATIONS AND WARRANTIES OF NOVELLUS. The representations given by
Novellus cover the following topics, among others, as they relate to Novellus
and its subsidiaries, including Neptune Acquisition-Sub:
- corporate organization and its qualification to do business;
- capital structure;
- authorization of the reorganization agreement;
- that the transactions contemplated by the merger will not result in a
violation of Novellus' organizational documents, laws or material
contracts;
- material consents and regulatory approvals necessary to complete the
merger;
- filings and reports with the SEC and financial statements;
- the absence of material changes, events or effects;
- absence of undisclosed liabilities;
- litigation;
- board actions approving the reorganization agreement the shareholder
approval requirement; and
- registration statement and proxy statement.
The representations and warranties in the reorganization agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the reorganization agreement entitled
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"Representations and Warranties of GaSonics" and "Representations and Warranties
of Novellus and Merger Sub."
As used in the reorganization agreement, any reference to any event,
change, condition or effect being "material" with respect to any entity or group
of entities means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of such
entity and its subsidiaries taken as a whole.
Any reference to a material adverse effect on GaSonics or Novellus means
any change, event or effect that is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of GaSonics or
Novellus and their subsidiaries, taken as a whole. None of the following shall
be deemed in themselves, either alone or in combination, to constitute a
material adverse effect on GaSonics or Novellus, and none of the following shall
be taken into account in determining whether there has been or will be, a
material adverse effect on GaSonics or Novellus: (a) any change in the market
price or trading volume of GaSonics' or Novellus' stock after October 25, 2000;
(b) any adverse change, effect, event, occurrence, state of facts or development
to the extent attributable to the announcement or pendency of the merger
(including any cancellation of or delays in customer orders, any reduction in
sales, any disruption in supplier, distributor, partner or similar relationships
or any loss of employees); (c) any adverse change, effect, event, occurrence,
state of facts or development attributable to conditions affecting the
industries as a whole in which GaSonics or Novellus participates, the United
States economy as a whole or the foreign economies as a whole in any locations
where GaSonics or Novellus or any of their subsidiaries has material operations
or sales; or (d) any adverse change, effect, event, occurrence, state of facts
or development arising from or relating to compliance with the terms of, or the
taking of, any action required by, the reorganization agreement.
GASONICS' CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER.
GaSonics agreed that until the earlier of the completion of the merger or
the termination of the reorganization agreement, or unless Novellus consents in
writing, to carry on its business in the usual, regular and ordinary course in
substantially the same manner as before. GaSonics further agreed to pay all
debts and taxes when due, subject to good faith disputes over such debts or
taxes and the filing of material tax returns, to pay or perform other
obligations when due, and to use all reasonable efforts consistent with past
practice and policies to preserve intact its present business organizations, to
keep available the services of its present officers and key employees and to
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, to the end that its
goodwill and ongoing businesses will not be impaired at the effective time of
the merger, other than what would not have a material adverse effect on
GaSonics.
Additionally, GaSonics agreed to promptly notify Novellus of any event or
occurrence not in the ordinary course of its business, and of any event which
could reasonably be expected to have a material adverse effect on GaSonics.
RESTRICTIONS ON GASONICS' CONDUCT OF ITS BUSINESS. GaSonics also agreed
that until the earlier of the completion of the merger or the termination of the
reorganization agreement or unless Novellus consents in writing, GaSonics and
its subsidiaries will not do any of the following:
- modify their organizational documents;
- pay or authorize dividends or other distributions or repurchases or any
stock splits or combinations;
- modify their stock option plans, including the vesting period or other
rights of options granted under GaSonics' stock option plans;
- enter into or modify material contracts;
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- issue, sell or otherwise dispose of securities, except for the issuance
of shares of common stock upon exercise of outstanding stock options, and
the granting of not more than 200,000 additional options under their
stock option plans following the date of the reorganization agreement;
- transfer their intellectual property or rights to their intellectual
property, except with respect to transfers in the ordinary course of
business;
- enter into or modify any agreement granting exclusive rights with respect
to their products or technology;
- dispose of or encumber any property or assets which are material, except
the sale of products in the ordinary course;
- incur indebtedness, except as reasonably necessary for the operation of
its business in a manner, and in amounts, consistent with past practices,
or guarantee any such indebtedness or issue or sell any debt securities
or guarantee any debt securities of others;
- enter into any material operating lease;
- pay or discharge, in an amount in excess of $100,000 in any one case or
$500,000 in the aggregate, any claim, liability or obligation arising
other than in the ordinary course of business, other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in
GaSonics' financial statements;
- make any capital expenditures, capital additions or capital improvements
except in the ordinary course of business, and notwithstanding the above,
make any such expenditures, additions or improvements in excess of
$250,000 in any one case;
- except in the ordinary course of business, commit to or incur any other
expenses in an amount in excess of $250,000 in any one case, and except
for payment of legal, accounting and banking fees in connection with the
reorganization agreement;
- materially reduce the amount of any insurance coverage provided by
existing insurance policies;
- terminate or waive any right of any material or substantial value, except
in the ordinary course of business;
- adopt or amend any employee benefit or stock plan or hire any new
director level or officer level employee, or increase the annual level of
compensation of any employee, or grant any unusual or extraordinary
bonuses, benefits or other director or indirect compensation, except in
the ordinary course of business and in amounts consistent with past
practices;
- grant severance or termination pay, enter into employment or severance
agreements or amend existing employment arrangements or enter into new
employment arrangements;
- commence a lawsuit other than (i) for the routine collection of bills,
(ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable
aspect of its business, or (iii) for a breach of the reorganization
agreement;
- acquire or merge with any other entities or establish interests in other
entities or assets;
- other than in the ordinary course of business, or as required by GAAP,
make or change in any material election in respect of taxes, adopt or
change any accounting method in respect of taxes, file any material tax
return or any amendment to a material tax return or settle a claim with
respect to taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of taxes;
- revalue any of its assets, including without limitation writing down the
value of inventory or writing off notes or accounts receivable other than
in the ordinary course of business;
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- act in a way which would reasonably be known after consultation with
GaSonics' financial and accounting advisors to interfere with Novellus'
ability to account for the merger as a "pooling-of-interest";
- agree in writing or otherwise to do any of the above things; and
- act in a way which would make GaSonics' representations and warranties
materially untrue or prevent it from performing or cause it not to
perform its covenants under the reorganization agreement.
The agreements in the reorganization agreement related to the conduct of
GaSonics' business are complicated and not easily summarized. You are urged to
carefully read the article of the reorganization agreement entitled "Restriction
on Conduct of Business of GaSonics."
RESTRICTIONS ON OTHER NEGOTIATIONS INVOLVING GASONICS.
Until the merger is completed or the reorganization agreement is
terminated, GaSonics has agreed that, subject to certain exceptions, neither it
nor any of its subsidiaries and the officers, directors, employees or other
agents of GaSonics and its subsidiaries will not, directly or indirectly:
- take any action to solicit, initiate or intentionally encourage any
"takeover proposal" (as defined below); or
- take any action to solicit, intentionally facilitate, intentionally
encourage or engage in negotiations or discussions with, or disclose any
nonpublic information relating to GaSonics or any of it subsidiaries to,
or afford access to the properties, books or records of GaSonics or any
of its subsidiaries to, any person that has advised GaSonics in writing
that it intends to make, or that has made, a takeover proposal.
However, GaSonics may furnish information regarding GaSonics to, or take
other actions consistent with the Board's fiduciary obligations, or enter into
and engage in discussions with, any person or group in response to an
unsolicited written takeover proposal, or an unsolicited written expression of
interest that can reasonably be expected to lead to a takeover proposal, if:
- none of GaSonics, its subsidiaries, and their respective officers,
directors, employees or other agents and representatives have violated
any of the no solicitation restrictions in the reorganization agreement;
- GaSonics' board of directors believes in good faith (after consultation
with its financial advisors) that such takeover proposal would, if
consummated, result in a "superior proposal," (as defined below); and
- GaSonics' board of directors determines in good faith (after consultation
with outside legal counsel) that failure to take action with respect to
such superior proposal would be inconsistent with the fiduciary duties of
the GaSonics' board of directors to the GaSonics' stockholders under
applicable law.
In addition, GaSonics is permitted to comply with Rules 14d-9 and 14e-2 of
the Securities Exchange Act of 1934 with regard to a tender or exchange offer.
Further, GaSonics and its officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants and other representatives
retained by it may furnish in connection with a superior proposal information
and take such other actions with respect to such superior proposal as are
consistent with the fiduciary obligations of GaSonics' board of directors, only
if, in each such event, GaSonics:
- notifies Novellus in writing of the determination by GaSonics' board of
directors that failure to take action with respect to such superior
proposal would be inconsistent with the fiduciary duties of the GaSonics'
board of directors to the GaSonics' stockholders under applicable law;
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- provides Novellus with a summary of the superior proposal received from
such third party so long as such disclosure does not cause the breach of
any non-disclosure or confidentiality agreements of GaSonics outstanding
as of October 25, 2000; and
- informs Novellus of all documents containing or referring to non-public
information of GaSonics that are supplied to such third party so long as
such disclosure does not cause the breach of any non-disclosure or
confidentiality agreements of GaSonics outstanding as of October 25,
2000.
GaSonics has also agreed to advise Novellus promptly after receipt, but in
no event later than 24 hours from such receipt, of any takeover proposal or any
notice that any person is considering making a takeover proposal or any request
for non-public information relating to GaSonics or any of its subsidiaries or
for access to the properties, books or records of GaSonics or any of its
subsidiaries by any person that has advised GaSonics that it may be considering
making, or that has made, a takeover proposal and GaSonics has agreed to keep
Novellus fully informed of the status of any such takeover proposal notice or
request and to provide Novellus with a true summary of such takeover proposal
notice or request.
In addition, neither GaSonics nor its representatives may take any action
with respect to a superior proposal unless:
- GaSonics' board of directors has determined, with the advice of GaSonics'
investment bankers, that the third party making such superior proposal is
actually capable of making the superior proposal upon satisfactory
completion of such third party's review of the information supplied by
GaSonics;
- the third party has stated that it intends to make a superior proposal;
and
- GaSonics provides such non-public information to such third party
pursuant to a non-disclosure or confidentiality agreement at least as
restrictive as the one entered into between GaSonics and Novellus in
connection with the merger.
Additionally GaSonics cannot, and has agreed not to permit any of its
officers, directors, employees or other representatives to agree to or
intentionally endorse any takeover proposal (including any superior proposal)
unless Novellus or GaSonics first terminates the reorganization agreement and
GaSonics pays to Novellus all termination fees payable to Novellus under the
reorganization agreement.
A "takeover proposal" means any offer or proposal for, or any indication of
interest in (whether written or oral), a merger or other business combination
involving GaSonics or any of its subsidiaries or the acquisition of any
significant equity interest (30%) in, or a significant portion of the assets
(30% or more on a consolidated basis) of, GaSonics or any of its subsidiaries,
other than the transactions contemplated by the reorganization agreement.
A "superior proposal" means any takeover proposal which the board of
directors of GaSonics determines in good faith (after consultation with its
financial advisors) would, if consummated, result in a transaction more
favorable to GaSonics' stockholders than the transaction contemplated by the
reorganization agreement.
The agreements in the reorganization agreement related to GaSonics' ability
to discuss or accept alternative or superior proposals are extremely complicated
and not easily summarized. You are urged to carefully read the section of the
reorganization agreement entitled "No Solicitation."
RECOMMENDATION OF THE BOARD OF DIRECTORS.
GaSonics has agreed to include in this proxy statement-prospectus the
recommendation of its board of directors to its stockholders concerning the
adoption of the reorganization agreement. Notwithstanding this, GaSonics may
withdraw or modify or fail to make its recommendation of the merger following
the making of a superior proposal, if:
- none of GaSonics, its subsidiaries, and their respective officers,
directors, employees or other agents and representatives have violated
any of the no solicitation restrictions in the reorganization agreement;
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- GaSonics' board of directors believes in good faith that a superior
proposal has been made; and
- following consultation with outside legal counsel, GaSonics' board of
directors determines that the inclusion of such recommendation or the
failure to withdraw such recommendation would be inconsistent with the
fiduciary duties of GaSonics' board of directors to the stockholders of
GaSonics under applicable laws.
GASONICS EMPLOYEE BENEFIT PLANS.
Individuals who are employed by GaSonics at the time the merger is
completed will continue to be employees of either GaSonics as the surviving
corporation in the merger or Novellus. Novellus has agreed to provide benefits
to employees of the surviving corporation of the merger and/or of Novellus,
including the right to participate in Novellus' 401(k) Plan, which in the
aggregate are no less favorable than those provided from time to time by
Novellus and its subsidiaries to their respective similarly situated employees.
Individuals who are employed by the surviving corporation or Novellus after the
merger is completed will be permitted to participate in Novellus' employee stock
purchase plan beginning on the first enrollment date following the effective
time of the merger and subject to compliance with the eligibility provisions of
such plan.
TREATMENT OF GASONICS STOCK OPTIONS.
Novellus will assume GaSonics' Supplemental Stock Option Plan, GaSonics'
1994 Stock Option/ Stock Issuance Plan, and the Gamma Precision Technology 1998
Stock Option Plan and all options granted under such plans in the merger. Upon
completion of the merger, each outstanding option award will be assumed by
Novellus, and will be exercisable on the same terms and conditions as under the
applicable GaSonics stock option plans, with adjustments described below. Each
outstanding option to purchase GaSonics common stock will be converted, in
accordance with its terms, into an option to purchase that whole number of
shares of Novellus common stock, rounded down to the nearest whole share, equal
to 0.52 times the number of shares of GaSonics common stock subject to the
outstanding option. The exercise price will equal the exercise price per share
of GaSonics common stock subject to the option before conversion divided by
0.52, rounded up to the nearest tenth of a cent.
Novellus will file a registration statement on Form S-8 for the shares of
Novellus common stock issuable with respect to options under the GaSonics stock
option plans and will use commercially reasonable efforts to maintain the
effectiveness of that registration statement for as long as any of the options
remain outstanding.
INDEMNIFICATION AND DIRECTORS AND OFFICERS INSURANCE.
Novellus has agreed to, following the merger, indemnify each current and
former director and officer of GaSonics or any of its subsidiaries to the extent
provided in GaSonics' current certificate of incorporation, bylaws or existing
indemnification agreement for a period of not less than (x) six years, in the
case of certain acts and omissions, and (y) four years, for all other acts or
omissions, after the effective time of the merger. Novellus has also agreed to
pay all expenses, including reasonable attorneys' fees, that may be incurred by
any indemnified party in enforcing the indemnity and other obligations provided
for in the reorganization agreement to the extent that the indemnified party is
determined to be entitled to indemnification under the reorganization agreement.
See "The Merger -- Interests of Directors and Executive Officers of GaSonics in
the Merger -- Indemnification and Directors' and Officers' Insurance on page
57."
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CONSENTS AND ANTITRUST FILINGS.
Each of Novellus and GaSonics have agreed to:
- use commercially reasonable efforts to obtain all consents and approvals
required to be obtained by each for the consummation of the merger,
including those required under HSR, and to resolve objections, if any,
that may be asserted by any governmental entity;
- use best efforts to obtain all necessary consents, waivers and approvals
under any material contracts in connection with the merger for the
assignment of the contract;
- consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made
or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to HSR or any other federal or state
antitrust or fair trade law;
- cooperate and use all commercially reasonable efforts vigorously to
contest and resist any action or proceeding and to have vacated or
overturned any decree, judgment, injunction or other order that is in
effect and that prohibits or restricts consummation of the merger, unless
both parties agree that litigation is not in their respective best
interests;
- obtain from governmental entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made in connection with the reorganization agreement and the merger; and
- make all necessary filings and submissions required under applicable
federal or state securities laws, the Hart-Scott-Rodino Act and any other
antitrust regulations and any other applicable law.
CONDITIONS TO COMPLETION OF THE MERGER.
CONDITIONS TO NOVELLUS AND GASONICS' OBLIGATIONS TO COMPLETE THE
MERGER. Novellus' and GaSonics' obligations to complete the merger are subject
to certain conditions. The conditions that must be satisfied or waived before
the completion of the merger include the following:
- the registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, must have become effective, no stop
order may have been issued and no proceedings for suspension of its
effectiveness may have been initiated by the SEC;
- the reorganization agreement must have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of GaSonics
common stock;
- no law, rule, regulation, judgment, decree, injunction, executive order
or award may have been enacted or issued or be effective which has the
effect of making the merger illegal or otherwise prohibiting completion
of the merger;
- the waiting period, and any extensions, applicable to the completion of
the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or under any other foreign antitrust or combination law and any material
filing, comment, approval or authorization legally required must either
have expired, been terminated or obtained; and
- legal opinions regarding the treatment of the merger as a tax-free
reorganization must have been received by Novellus and GaSonics.
CONDITIONS TO GASONICS' OBLIGATION TO COMPLETE THE MERGER. GaSonics'
obligations to complete the merger are subject to the satisfaction or waiver of
each of the following additional conditions before completion of the merger:
- Novellus' representations and warranties must be materially true and
correct, except where the failure to be so true and correct has not had
and would not reasonably be expected to have a material adverse effect on
Novellus;
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- Novellus must have performed or complied in all material respects with
all of its agreements and covenants to be performed or complied with by
Novellus at or before completion of the merger; and
- GaSonics must have received a letter from its independent accountants
stating that GaSonics is poolable in connection with the treatment of the
merger as a pooling-of-interests.
CONDITIONS TO NOVELLUS' OBLIGATION TO COMPLETE THE MERGER. Novellus'
obligations to complete the merger are subject to the satisfaction or waiver of
each of the following additional conditions before completion of the merger:
- GaSonics' representations and warranties must be materially true and
correct, except where the failure to be so true and correct has not had
and would not reasonably be expected to have a material adverse effect on
GaSonics;
- GaSonics must have performed or complied in all material respects with
all of its agreements and covenants, including its covenant to use
commercially reasonable efforts to obtain material consents to the
merger, to be performed or complied with by GaSonics at or before
completion of the merger;
- Novellus must have received a letter from its independent accountants
that the merger will qualify for pooling-of-interests accounting
treatment;
- Novellus must have received executed affiliates letters from each
GaSonics affiliate; and
- GaSonics shall not have incurred any legal, accounting and financial
advisors fees in excess of specified amounts set forth in the
reorganization agreement.
The agreements in the reorganization agreement related to Novellus' and
GaSonics' obligations to complete the merger are complicated and not easily
summarized. You are urged to carefully read the sections of the reorganization
agreement entitled "Conditions to Obligations of Each Party to Effect the
Merger;" "Additional Conditions to Obligations of GaSonics" and "Additional
Conditions to Obligations of Novellus."
TERMINATION OF THE REORGANIZATION AGREEMENT.
TERMINATION OF REORGANIZATION AGREEMENT BY NOVELLUS OR GASONICS. The
reorganization agreement may be terminated by either Novellus or GaSonics:
- by mutual written consent of Novellus and GaSonics;
- if the merger is not completed before April 25, 2001, which date may be
extended by the mutual consent of Novellus and GaSonics;
- if there is any permanent injunction or other order of a court or other
authority preventing the consummation of the merger shall which has
become final and nonappealable; or
- if GaSonics' stockholders do not adopt the reorganization agreement at
the GaSonics special meeting.
TERMINATION OF REORGANIZATION AGREEMENT BY NOVELLUS. In addition, Novellus
may terminate the reorganization agreement if:
- GaSonics materially breaches any representation, warranty, obligation or
agreement under the reorganization agreement (other than a breach of the
no solicitation restrictions set forth in Section 4.3(a) of the
reorganization agreement and other than a breach which has not had, and
would not reasonably be expected to result in, a material adverse effect
on GaSonics) and the breach is not cured within 20 business days of
written notice of the breach;
- GaSonics' board of directors withdraws or modifies its recommendation of
the merger in a manner adverse to Novellus or recommends, endorses,
accepts or agrees to a takeover proposal or resolves to do any of the
foregoing;
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- GaSonics' board of directors rejects a takeover proposal, but fails to
give Novellus a written reaffirmation of its recommendation of the merger
within five business days following the rejection of such proposal;
- a person unaffiliated with Novellus starts a tender or exchange offer for
30% or more of the outstanding shares of GaSonics, and GaSonics' board of
directors recommends that its stockholders tender their shares or fails
to recommend against acceptance of such offer or takes no position with
respect to the acceptance of such offer and fails to deliver to Novellus
a written reaffirmation of its recommendation of the merger within five
business days following the commencement of such offer;
- GaSonics' board of directors fails to call and hold a stockholders
meeting by March 15, 2000; or
- GaSonics or any of its subsidiaries or their respective officers,
directors, employees or representatives materially breach or violate the
no solicitation restrictions set forth in of Section 4.3(a) of the
reorganization agreement.
TERMINATION OF REORGANIZATION AGREEMENT BY GASONICS. Furthermore, GaSonics
may terminate the reorganization agreement if:
- Novellus materially breaches any representation, warranty, obligation or
agreement under the reorganization agreement (other than a breach which
has not had, and would not reasonably be expected to result in, a
material adverse effect on Novellus) and the breach is not cured within
20 business days of written notice of the breach; or
- GaSonics' board of directors recommends, endorses, accepts or agrees to
an alternative transaction which is superior to the merger or resolves to
recommend, endorse, accept or agree to such superior transaction.
The agreements in the reorganization agreement related to Novellus' and
GaSonics' ability to terminate the reorganization agreement are complicated and
not easily summarized. You are urged to carefully read the sections of the
reorganization agreement entitled "Termination" and "Effect of Termination."
EXPENSES; PAYMENT OF TERMINATION FEES.
EXPENSES. Except as described below, each party has agreed to pay all
expenses it incurs in connection with the merger, whether or not the transaction
is completed.
PAYMENT OF TERMINATION FEES. GaSonics must pay Novellus a termination fee
equal to 3% of the average closing price of Novellus common stock for the 20-day
period ending on the day one day prior to the termination date that would have
been issued in the merger as of the date of termination of the reorganization
agreement upon the occurrence of a number of events, including:
- GaSonics' board of directors withdraws or modifies its recommendation of
the merger in a manner adverse to Novellus or recommends, endorses,
accepts or agrees to an alternative transaction meeting the requirements
set forth in the reorganization agreement or resolves to do such any of
the foregoing;
- GaSonics' board of directors rejects an alternative transaction meeting
the requirements set forth in the reorganization agreement, but fails to
give Novellus a written reaffirmation of its recommendation of the merger
within five business days following the rejection of such alternative
proposal;
- a person unaffiliated with Novellus starts a tender or exchange offer for
30% or more of the outstanding shares of GaSonics, and GaSonics' board of
directors recommends that its stockholders tender their shares or fails
to recommend against acceptance of such offer or takes no position with
respect to the acceptance of such offer and fails to deliver to Novellus
a written reaffirmation of its recommendation of the merger within five
business days following the commencement of such offer;
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- GaSonics or any of its subsidiaries or their respective officers,
directors, employees or representatives materially breach or violate the
no solicitation restrictions set forth in of Section 4.3(a) of the
reorganization agreement; or
- GaSonics' board of directors recommends, endorses, accepts or agrees to
an alternative transaction which is superior to the merger or resolves to
recommend, endorse, accept or agree to such superior transaction.
Additionally, GaSonics must promptly reimburse Novellus for all of the
actual, documented, reasonable out-of-pocket costs and expenses incurred by
Novellus in connection with the reorganization agreement (including, without
limitation, the fees and expenses of its outside advisors, outside accountants
and outside legal counsel) if the reorganization agreement is terminated by
Novellus because GaSonics materially breaches any representation, warranty,
obligation or agreement under the reorganization agreement (other than a breach
of the no solicitation restrictions or a breach which has not had, and would not
reasonably be expected to result in, a material adverse effect on GaSonics) and
the breach is not cured within 20 business days of written notice of the breach.
Novellus must promptly reimburse GaSonics for all of the actual,
documented, reasonable out-of-pocket costs and expenses incurred by GaSonics in
connection with the reorganization agreement (including, without limitation, the
fees and expenses of its outside advisors, outside accountants and outside legal
counsel) if the reorganization agreement is terminated by GaSonics because
Novellus materially breaches any representation, warranty, obligation or
agreement under the reorganization agreement (other than a breach which has not
had, and would not reasonably be expected to result in, a material adverse
effect on Novellus) and the breach is not cured within 20 business days of
written notice of the breach.
Additionally, in the event that either GaSonics' or Novellus' accountants
determine that their respective client is not poolable, and such non-poolable
party terminates the reorganization agreement or otherwise determines not to
close the transactions contemplated by the reorganization agreement, such
non-poolable party must promptly reimburse the other party for all of the
actual, documented and reasonable out-of-pocket costs and expenses incurred by
such party in connection with the reorganization agreement (including without
limitation the fees and expenses of its outside advisors, outside accountants
and outside legal counsel).
The agreements in the reorganization agreement related to Novellus' and
GaSonics' obligations to pay expenses and termination fees are complicated and
not easily summarized. You are urged to carefully read the section of the
reorganization agreement entitled "Expenses and Termination Fees."
EXTENSION, WAIVER AND AMENDMENT.
GaSonics and Novellus may amend the reorganization agreement at any time
prior to the closing of the merger. However, after the adoption of the
reorganization agreement by the GaSonics stockholders, GaSonics and Novellus may
not amend the reorganization agreement if the amendment would alter or change
the amount or kind of consideration to be received on conversion of GaSonics'
stock, alter or change any term of the Certificate of Incorporation of the
Surviving Corporation to be effected by the merger, or alter or change any of
the terms and conditions of the reorganization agreement, if such alteration or
change would materially adversely affect the holders of GaSonics stock.
At any time prior to the closing of the merger, GaSonics or Novellus may
extend the time for performance of any obligation or other act of the other
party, waive any inaccuracy in the representations and warranties in the
reorganization agreement or waive compliance by the other party with any
agreement or condition contained in the reorganization agreement.
AFFILIATES AGREEMENTS AND RESTRICTIONS ON THE ABILITY TO SELL NOVELLUS STOCK.
The parties have agreed to use commercially reasonable efforts to have all
affiliates of GaSonics and Novellus execute affiliates agreements prior to
closing. Under the GaSonics affiliates agreements, Novellus
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will be entitled to place appropriate legends on the certificates evidencing any
Novellus common stock to be received by affiliates of GaSonics. In addition,
affiliates of GaSonics have also acknowledged the resale restrictions imposed by
Rule 145 under the Securities Act on shares of Novellus common stock to be
received by them in the merger. Further, in connection with the accounting for
the merger as a pooling-of-interests, both GaSonics and Novellus affiliates
agree in their respective affiliates agreements that they will not, within the
30 days preceding the effective time of the merger, sell, transfer or otherwise
dispose of or reduced their risk relative to any shares of Novellus common stock
beneficially owned by the affiliate and transfer any Novellus common stock
received by such affiliate in the merger until after such time as results
covering at least 30 days of combined operations of Novellus and GaSonics have
been published by Novellus in the form of an effective registration statement
filed with the Securities Exchange Commission, a quarterly or annual report on
Form 10-Q, 10-K or 8-K, or any other public filing or announcement which
includes such combined results of operations.
All shares of Novellus common stock received by you in connection with the
merger will be freely transferable unless you are considered an affiliate of
either Novellus or GaSonics under the federal securities laws. Shares of
Novellus common stock held by affiliates of Novellus may only be sold pursuant
to a registration statement or exemption under the Securities Act, or as
permitted under the rules of the Securities Act and subject to the terms of the
Novellus and GaSonics' affiliates agreements.
OPERATIONS AFTER THE MERGER.
Following the merger, GaSonics will continue its operations as a
wholly-owned subsidiary of Novellus for a period of time determined by Novellus.
Some officers of Novellus may serve as officers of GaSonics. The executives of
GaSonics will assume the roles and positions with either the surviving
corporation or Novellus described under "The Merger -- Interests of Directors
and Executive Officers of GaSonics in the Merger" beginning on page 57. The
stockholders of GaSonics will become shareholders of Novellus, and their rights
as shareholders of Novellus will be governed by the Novellus articles of
incorporation, as currently in effect, the Novellus bylaws and the laws of the
State of California. See "Comparison of Rights of Holders of GaSonics Common
Stock and Novellus Common Stock" beginning on page 75.
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COMPARISON OF RIGHTS OF HOLDERS OF GASONICS COMMON STOCK AND
NOVELLUS COMMON STOCK
The following discussion of certain similarities and material differences
between the rights of GaSonics stockholders and the rights of Novellus
shareholders under Novellus' articles of incorporation and GaSonics' certificate
of incorporation and their respective bylaws is only a summary of certain
provisions and does not purport to be a complete description of the similarities
and differences, and is qualified in its entirety by reference to the California
law and the Delaware law, the common law thereunder and the full text of the
articles/certificate of incorporation and bylaws of each of Novellus and
GaSonics. While Novellus and GaSonics believe that the description covers the
material differences between the two, this summary may not contain all of the
information that is important to you. You should carefully read this entire
document and the other documents referred to for a more complete understanding
of the differences between being a stockholder of GaSonics and being a
shareholder of Novellus. When reading this description, please note that
Delaware law refers to holders of common stock as stockholders while California
law uses the term shareholder. The two terms mean the same thing in practice and
for all practical purposes may be used interchangeably; however, the discussion
generally uses the term "stockholder" when referring to holders of GaSonics
common stock or to Delaware law and "shareholder" when referring to holders of
Novellus common stock or to California law.
As a stockholder of GaSonics, your rights are governed by GaSonics' amended
and restated certificate of incorporation, as currently in effect, and GaSonics'
amended and restated bylaws. After completion of the merger, you will become a
shareholder of Novellus. As a Novellus shareholder, your rights will be governed
by Novellus' articles of incorporation and Novellus' bylaws. In addition,
Novellus is incorporated in California while GaSonics is incorporated in
Delaware. Although the rights and privileges of stockholders of a Delaware
corporation are in many instances comparable to those of shareholders of a
California corporation, there are also differences.
DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS.
The GaSonics bylaws provide that GaSonics stockholders may include on the
agenda for a regular or special stockholders' meeting stockholder nominations to
the board of directors and any other business such stockholders desire to be
acted upon at the meeting only if the stockholder proposal is specified in the
notice of meeting given by or at the direction of the board of directors or the
proposal is otherwise properly brought before the meeting by the board of
directors or a stockholder. The stockholder proposal shall be considered
properly brought before the meeting by a stockholder if the stockholder delivers
to the secretary of GaSonics, not fewer than 30 nor more than 60 days prior to
the meeting a notice of such proposal.
The Novellus bylaws provide that shareholders may propose business to be
brought before a meeting of shareholders or nominate directors only if they
provide notice to Novellus not less than 60 days nor more than 75 days prior to
the date on which Novellus mails its proxy materials for the current year's
annual meeting of its shareholders.
AMENDMENT TO GOVERNING DOCUMENTS.
Delaware law requires a vote of the corporation's board of directors
followed by the affirmative vote of a majority of the outstanding stock of each
class entitled to vote for any amendment to the certificate of incorporation,
unless a greater level of approval is required by the certificate of
incorporation. Further, Delaware law states that if an amendment would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of shares of such class or alter or change the powers,
preferences or special rights of a particular class or series of stock so as to
affect them adversely, the class or series shall be given the power to vote as a
class notwithstanding the absence of any specifically enumerated power in the
certificate of incorporation. Delaware law also states that the power to adopt,
amend or repeal the bylaws of a corporation shall be vested in the stockholders
entitled to vote,
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provided that the corporation in its certificate of incorporation may confer
such power on the board of directors in addition to the stockholders.
GaSonics' certificate of incorporation provides that the board of directors
is expressly authorized to make, repeal, alter, amend and rescind any or all of
the bylaws of GaSonics.
Unless otherwise specified in a California corporation's articles of
incorporation, an amendment to the articles of incorporation requires the
approval of the corporation's board of directors and the affirmative vote of a
majority of the outstanding shares entitled to vote thereon, either before or
after the board approval, although certain minor amendments may be adopted by
the board alone such as amendments causing stock splits (including an increase
in the authorized number of shares in proportion thereto) and amendments
changing names and addresses given in the articles. The Novellus articles of
incorporation do not require a greater level of approval for an amendment
thereto. Under California law, the holders of the outstanding shares of a class
of stock are entitled to vote as a class if a proposed amendment to the articles
of incorporation would:
- increase or decrease the aggregate number of authorized shares of such
class;
- effect an exchange, reclassification or cancellation of all or part of
the shares of such class, other than a stock split;
- effect an exchange, or create a right of exchange, of all or part of the
shares of another class into the shares of such class;
- change the rights, preferences, privileges or restrictions of the shares
of such class;
- create a new class of shares having rights, preferences or privileges
prior to the shares of such class, or increase the rights, preferences or
privileges or the number of authorized shares having rights, preference
or privileges prior to the shares of such class;
- in the case of preferred shares, divide the shares of any class into
series having different rights, preferences, privileges or restrictions
or authorize the board of directors to do so; or
- cancel or otherwise affect dividends on the shares of such class which
have accrued but have not been paid.
Under California law, a corporation's bylaws may be adopted, amended or
repealed either by the board of directors or the shareholders of the
corporation. The Novellus bylaws provide that the Novellus bylaws may be
adopted, amended or repealed either by the vote of the holders of a majority of
the outstanding shares entitled to vote or by the board of directors; provided,
however, that the Novellus board of directors may not amend the Novellus bylaws
in order to change the provisions regarding adoption, amendment or repeal of the
Novellus bylaws or to change the authorized number of directors (except to alter
the authorized number of directors within the existing range of a minimum of
four and a maximum of seven directors).
CUMULATIVE VOTING.
GaSonics' certificate of incorporation does not provide for cumulative
voting of the GaSonics stockholders. Therefore, under Delaware law, cumulative
voting rights are not available to GaSonics stockholders. Under the cumulative
voting provisions in Novellus' bylaws, each shareholder may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which such
shareholder's shares are entitled, or such shareholder may distribute his or her
votes among as many candidates as the shareholder sees fit. However, cumulative
voting will not be available to Novellus shareholders unless, at a meeting of
shareholders, at least one shareholder has given written notice of his intention
to cumulate votes prior to the voting, and will apply only to those candidates
whose names have been placed in nomination prior to the voting.
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APPRAISAL RIGHTS.
Under Delaware law, holders of shares of any class or series, who neither
vote in favor of the merger or consolidation nor consent thereto in writing,
have the right, in certain circumstances, to dissent from a merger or
consolidation by demanding payment in cash for their shares equal to the fair
value (excluding any appreciation or depreciation as a consequence or in
expectation of the transaction) of such shares, as determined by agreement with
the corporation or by an independent appraiser appointed by a court in an action
timely brought by the corporation or the dissenters. Delaware law grants
dissenters' appraisal rights only in the case of mergers or consolidations and
not in the case of a sale or transfer of assets or a purchase of assets for
stock regardless of the number of shares being issued. Further, no appraisal
rights are available for shares of any class or series listed on a national
securities exchange or designated as a national market system security on The
Nasdaq National Market or held of record by more than 2,000 stockholders, unless
the agreement of merger or consolidation converts such shares into anything
other than stock of the surviving corporation; stock of another corporation
which is either listed on a national securities exchange or designated as a
national market system security on the Nasdaq National Market or held of record
by more than 2,000 stockholders; cash in lieu of fractional shares; or some
combination of the above. In addition, dissenters' rights are not available for
any shares of the surviving corporation if the merger did not require the vote
of the stockholders of the surviving corporation. GaSonics stockholders are not
entitled to exercise dissenters' or appraisal rights as a result of the merger
or to demand payment for their shares under Delaware or other applicable law.
See "The Merger -- No Appraisal Rights" on page 62.
Under California law, if the approval of the outstanding shares of the
corporation is required for a merger or reorganization, each shareholder
entitled to vote on the transaction, and who did not vote in favor of the
reorganization, may require the corporation to purchase for cash at their fair
market value the shares owned by such shareholder. No appraisal rights are
available for shares listed on any national securities exchange certified by the
Commissioner of Corporations or listed on the list of OTC margin stocks issued
by the Board of Governors of the Federal Reserve Systems, unless there exists
with respect to such shares any restriction on transfer imposed by the
corporation or by any law or regulation or if demands for payment are filed with
respect to 5% or more of the outstanding shares of that class.
DERIVATIVE ACTION.
Derivative actions may be brought in Delaware by a stockholder on behalf
of, and for the benefit of, the corporation. Delaware law provides that a
stockholder must aver in the complaint that he or she was a stockholder of the
corporation at the time of the transaction of which he or she complains. A
stockholder may not sue derivatively unless he first makes demand on the
corporation that it bring suit and such demand has been refused, unless it is
shown that such demand would have been futile.
California law provides that a shareholder bringing a derivative action on
behalf of the corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met concerning the
fairness of allowing the action to go forward. The shareholder must make his or
her demands on the board before filing suit. The California law also provides
that the corporation or the defendant in a derivative suit may make a motion to
the court for an order requiring the plaintiff shareholder to furnish a security
bond.
STOCKHOLDER CONSENT IN LIEU OF MEETING.
Under Delaware law and California law, unless otherwise provided in the
certificate or articles of incorporation, any action required to be taken or
which may be taken at an annual or special meeting of stockholders may be taken
without a meeting if a consent in writing is signed by the holders of
outstanding stock having at least the minimum number of votes required to
authorize such action. If consent is sought for less than all shareholders
entitled to vote, notice as required under the California law shall be given.
Neither the GaSonics certificate of incorporation nor the GaSonics' bylaws
prohibit stockholder action without a duly called annual or special meeting of
the stockholders. The Novellus bylaws provide that
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directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors.
FIDUCIARY DUTIES OF DIRECTORS.
Directors of corporations incorporated or organized under Delaware law and
California law have fiduciary obligations to the corporation and its
stockholders. Pursuant to these fiduciary obligations, the directors must act in
accordance with the so-called duties of "due care" and "loyalty." Under Delaware
law, the duty of care requires that the directors act in an informed and
deliberative manner and to inform themselves, prior to making a business
decision, of all material information reasonably available to them. The duty of
loyalty may be summarized as the duty to act in good faith, not out of
self-interest and in a manner that the directors reasonably believe to be in the
best interests of the corporation. Under California law, the duty of loyalty
requires directors to perform their duties in good faith in a manner that the
directors reasonably believe to be in the best interests of the corporation and
its shareholders. The duty of care requires that the directors act with such
care, including reasonable inquiry, as an ordinarily prudent person in a like
position would exercise under similar circumstances.
INDEMNIFICATION.
Delaware law generally permits a corporation to indemnify its directors and
officers against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with a third-party action, other
than a derivative action, and against expenses actually and reasonably incurred
in the defense or settlement of a derivative action, provided that there is a
determination that the individual acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. Such
determination shall be made, in the case of an individual who is a director or
officer at the time of such determination:
- by a majority of the disinterested directors, even though less than a
quorum;
- by a committee of such directors designated by a majority vote of such
directors, even though less than a quorum;
- by independent legal counsel, regardless of whether a quorum of
disinterested directors exists; or
- by a majority vote of the stockholders, at a meeting at which a quorum is
present.
Delaware law requires indemnification of directors and officers for
expenses relating to a successful defense on the merits or otherwise of a
derivative or third-party action. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
individual is adjudged liable to the corporation.
Delaware law does permit a corporation to advance expenses relating to the
defense of any proceeding to directors and officers contingent upon such
individuals' commitment to repay any advances unless it is determined ultimately
that such individuals are entitled to be indemnified. Under Delaware law, the
rights to indemnification and advancement of expenses provided in the law are
non-exclusive, in that, subject to public policy issues, indemnification and
advancement of expenses beyond that provided by statute may be provided by
bylaw, agreement, vote of stockholders, disinterested directors or otherwise.
The GaSonics certificate of incorporation and bylaws provide that its
directors shall not be personally liable for monetary damages resulting from
breaches of their fiduciary duty to the extent permitted by the Delaware General
Corporation Law and provide for the indemnification of the GaSonics directors
and officers to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law, including circumstances in which indemnification is
otherwise discretionary.
Under California law, a corporation has the power to indemnify present and
former directors, officers, employees and agents against expenses, judgments,
fines, settlements and other amounts (other than in connection with actions by
or in the right of the corporation) if that person acted in good faith and in a
manner the person reasonably believed to be in the best interests of the
corporation and, in the case of a
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criminal proceeding, had no reasonable cause to believe the conduct of the
person was unlawful, and a corporation has the power to indemnify, with certain
exceptions, any person who is a party to any action by or in the right of the
corporation, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of the action if the person acted in
good faith and in a manner the person believed to be in the best interests of
the corporation and its shareholders.
The indemnification authorized by California law is not exclusive, and a
corporation may grant its directors, officers, employees or other agents certain
additional rights to indemnification. The Novellus articles of incorporation and
the Novellus bylaws provide for the indemnification of its agents (as defined
under the California law) to the fullest extent permissible under California
law, which may be in excess of the indemnification expressly permitted by
Section 317 of the California Corporations Code, subject to the limits set forth
in Section 204 of the California Corporations Code with respect to actions for
breach of duty to the corporation and its shareholders.
California law also allows for the advance payment of an indemnitee's
expenses prior to the final disposition of an action, provided that the
indemnitee undertakes to repay any such amount advanced if it is later
determined that the indemnitee is not entitled to indemnification with regard to
the action for which the expenses were advanced.
Insofar as indemnification for liabilities under securities laws may be
permitted to directors, officers or persons controlling GaSonics, pursuant to
the foregoing provisions, in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
DIRECTOR LIABILITY.
Delaware law and California law each provide that the charter documents of
the corporation may include provisions which limit or eliminate the liability of
directors to the corporation or its stockholders, provided such liability does
not arise from certain proscribed conduct, including, in the case of Delaware
law, for any breach of the director's duty of loyalty to the corporation or its
stockholders acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, the payment of unlawful dividends or
expenditure of funds for unlawful stock purchases or redemptions or transactions
from which such director derived an improper personal benefit, or, in the case
of California law, intentional misconduct or knowing and culpable violation of
law, acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders or that involve the absence of
good faith on the part of the director, the receipt of an improper personal
benefit, acts or omissions that show reckless disregard for the director's duty
to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders, acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of the
director's duty to the corporation and its shareholders, interested transactions
between the corporation and a director in which a director has a material
financial interest and liability for improper distributions, loans or
guarantees. The GaSonics certificate of incorporation contains a provision
limiting the liability of its directors except as required by Delaware law. The
Novellus articles of incorporation contain a provision limiting the liability of
its directors to the fullest extent provided by California law.
ANTI-TAKEOVER PROVISIONS AND INTERESTED STOCKHOLDER/SHAREHOLDER TRANSACTIONS.
The GaSonics bylaws provide that a special meeting of the stockholders may
be called by stockholders owning not less than 10% of the issued and outstanding
stock entitled to vote, the board of directors or the president. The Novellus
bylaws provide that in addition to the board of directors, the chairman of the
board and the president, one or more shareholders holding not less than 10% of
the voting power of the corporation may call a special meeting of the
shareholders.
Delaware law prohibits, in certain circumstances, a "business combination"
between the corporation and an "interested stockholder" within three years of
the stockholder becoming an "interested
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stockholder." An "interested stockholder" is a holder who, directly or
indirectly, controls 15% or more of the outstanding voting stock or is an
affiliate of the corporation and was the owner of 15% or more of the outstanding
voting stock at any time within the prior three year period. A "business
combination" includes a merger or consolidation, a sale or other disposition of
assets having an aggregate market value equal to 10% or more of the consolidated
assets of the corporation or the aggregate market value of the outstanding stock
of the corporation and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation. This provision
does not apply where:
- either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the
corporation's board of directors prior to the date the interested
stockholder acquired such 15% interest;
- upon the consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock of the
corporation excluding for the purposes of determining the number of
shares outstanding shares held by persons who are directors and also
officers and by employee stock plans in which participants do not have
the right to determine confidentially whether shares held subject to the
plan will be tendered;
- the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of the outstanding votes
entitled to be cast by disinterested stockholders at an annual or special
meeting;
- the corporation does not have a class of voting stock that is listed on a
national securities exchange, authorized for quotation on an inter-dealer
quotation system of a registered national securities association, or held
of record by more than 2,000 stockholders unless any of the foregoing
results from action taken, directly or indirectly, by an interested
stockholder or from a transaction in which a person becomes an interested
stockholder;
- the stockholder acquires a 15% interest inadvertently and divests itself
of such ownership and would not have been a 15% stockholder in the
preceding three years but for the inadvertent acquisition of ownership;
- the stockholder acquired the 15% interest when these restrictions did not
apply; or the corporation has opted out of this provision.
GaSonics has not opted out of this provision.
Under California law, there is no comparable provision. However, California
law does provide that, except where the fairness of the terms and conditions of
the transaction has been approved by the California Commissioner of Corporations
and except in a "short-form" merger (the merger of a parent corporation with a
subsidiary in which the parent owns at least 90% of the outstanding shares of
each class of the subsidiary's stock), if the surviving corporation or its
parent corporation owns, directly or indirectly, shares of the target
corporation representing more than 50% of the voting power of the target
corporation prior to the merger, the nonredeemable common stock of a target
corporation may be converted only into nonredeemable common stock of the
surviving corporation or its parent corporation, unless all of the shareholders
of the class consent. The effect of this provision is to prohibit a cash-out
merger of minority shareholders, except where the majority shareholders already
own 90% or more of the voting power of the target corporation and could,
therefore, effect a short-form merger to accomplish such a cash-out of minority
shareholders.
ADVANCE NOTICE OF RECORD DATE.
Delaware law requires that stockholders be provided prior written notice no
more than 60 days nor less than 10 days prior to the record date for determining
the rights to vote at the meeting of stockholders. Delaware law further states
that stockholders be provided prior written notice no more than 60 days prior to
the record date to determine the stockholders entitled to receive payment of any
dividend or other
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<PAGE> 89
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action. Finally, Delaware law provides that due
notice of the time, place and purpose of the meeting to approve a reorganization
agreement be mailed at least 30 days prior to the date of the meeting.
California law requires that shareholders be provided prior written notice
no more than 60 days nor less than 10 days prior to the record date for
determining the shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action.
INSPECTION OF BOOKS AND RECORDS.
Delaware and California law allow any stockholder to inspect the accounting
books and records and minutes of proceedings of the stockholders and the board
and to inspect the stockholders' list at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
stockholder. Additionally, California law provides for an absolute right to
inspect and copy the corporation's shareholders list by a shareholder or
shareholders holding at least 5% in the aggregate of the corporation's
outstanding voting shares, or any shareholder or shareholders holding 1% or more
of such shares who have filed a Schedule 14A with the Commission.
SIZE OF THE BOARD OF DIRECTORS.
Delaware law states that the board of directors shall consist of one or
more members with the number of directors to be fixed as provided in the bylaws
of the corporation, unless the certificate of incorporation fixes the number of
directors, in which case a change in the number of directors shall be made only
by amendment of the certificate. The GaSonics bylaws provide that the number of
directors which shall constitute the whole board shall be determined by
resolution of the board of directors or by the stockholders at the annual
meeting.
Under California law, as provided in the articles of incorporation or
bylaws, the number of directors may be specific or may be not less than a stated
minimum nor more than a stated maximum, with the exact number to be fixed by the
board or the shareholders. The minimum number cannot be less than three. A bylaw
changing or fixing a number of directors may only be adopted by approval of a
majority of the outstanding shares. The Novellus bylaws provide that the
authorized number of directors of the corporation shall be not less than four
nor more than seven, the exact number of directors to be fixed from time to time
within such range by a bylaw or bylaw amendment adopted by a majority of the
shares entitled to vote at a meeting of the shareholders at which a quorum is
present or by the written consent of the holders of a majority of the
outstanding shares entitled to vote or by the board of directors or a resolution
of the board of directors.
REMOVAL OF DIRECTORS.
Delaware law states that any director or the entire board of directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors. GaSonics' bylaws provide that
GaSonics directors may be removed only for cause and only by the affirmative
vote of the holders of at least a majority of the outstanding shares of capital
stock of GaSonics entitled to vote generally in the election of directors,
voting together as a single class.
California law provides that the board of directors may declare vacant the
office of a director who has been declared of unsound mind by an order of court
or convicted of a felony. Further, any director or the entire board of directors
may be removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote thereon; however, no director may be removed
(unless the entire board is removed) if the number of shares voted against the
removal would be sufficient to elect the director under cumulative voting.
Shareholders holding at least 10% of the outstanding shares in any class may sue
in superior county court to remove from office any officer or director for
fraud, dishonest acts or gross abuse of authority or discretion.
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TRANSACTIONS INVOLVING DIRECTORS.
Both Delaware law and California law state that any contract or transaction
between a corporation and any of its directors, or a second corporation in which
a director has a material financial interest is not void or voidable if the
material facts as to the transaction and as to the director's interest are fully
disclosed and a majority of the disinterested shareholders represented and
voting at a duly held meeting approve or ratify the transaction in good faith.
California law provides that such a contract or transaction also is not void or
voidable if either after full disclosure the transaction is approved by the
board or a committee (excluding the vote of interested directors) in good faith
and the transaction is just and reasonable to the corporation, or the person
asserting the validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as to the
corporation at the time it was authorized, approved or ratified. Delaware law is
similar except that there is no need for the transaction to be shown to be just
and reasonable, and the transaction must be shown to be fair instead of just and
reasonable.
FILLING VACANCIES ON THE BOARD OF DIRECTORS.
Delaware law provides that, unless otherwise provided in the certificate of
incorporation or bylaws, vacancies may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Further, if, at the time of filling any vacancy, the directors then in office
shall constitute less than a majority of the whole board, the Court of Chancery
may, upon application of any stockholder or stockholders holding at least 10% of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order any election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
GaSonics' bylaws provide that vacancies may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Any director elected by the board of directors to fill a vacancy or
newly created directorship shall hold the office for the remainder of the full
term of the class of directors in which such directorship is part, and until
such director's successor is elected and deemed qualified.
Under California law, any vacancy on the board of directors other than one
created by removal of a director may be filled by the board of directors, unless
otherwise provided in the articles or bylaws. If the number of directors is less
than a quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of director can only be filled by the
shareholders unless board approval is authorized by a corporation's articles of
incorporation or by a bylaw approved by the corporation's shareholders. The
Novellus bylaws authorize only Novellus' shareholders to fill a vacancy created
by the removal of a director.
INSPECTION OF STOCKHOLDERS LIST.
Delaware law permits any stockholder by making a written demand under oath
stating the purpose at the inspection, to inspect a corporation's stock ledger,
a list of its stockholders and its other books and records, and to make copies
of extracts from the books and records for any proper purpose. If the
corporation refuses such a request, or fails to respond within five business
days after the demand has been made, the stockholder may petition the court for
an order to compel such an inspection. The court may prescribe limitations or
conditions upon the inspection, or award any other or further relief the court
deems just and proper.
California law allows any shareholder upon written demand to inspect a
corporation's list of shareholders for a purpose reasonably related to such
person's interests as a shareholder. In addition, California law provides an
absolute right to inspect and copy the corporation's shareholders' list to
persons holding an aggregate of 5% or more of a corporation's voting shares, or
shareholders holding an aggregate of 1% or more of such shares who have filed a
Schedule 14A with the Securities and Exchange Commission.
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SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF GASONICS
The following table sets forth information concerning the beneficial
ownership of common stock of GaSonics as of December 7, 2000 of the following:
- each person or entity who is known by GaSonics to own beneficially more
than five percent of the outstanding shares of GaSonics common stock;
- each of GaSonics' current directors;
- the chief executive officer and other four most highly compensated
officers of GaSonics (the "Named Executive Officers"); and
- all directors and executive officers of GaSonics as a group.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act and the information is
not necessarily indicate of beneficial ownership for any other purpose. Under
that rule, beneficial ownership includes any shares as to which the individual
or entity has voting power or investment power and any shares that the
individual has the right to acquire within 60 days of December 7, 2000 through
the exercise of any stock option or other right. Unless otherwise indicated in
the footnotes or table, each person or entity has sole voting and investment
power, or shares such powers with his or her spouse, with respect to the shares
shown as beneficially owned.
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -----------
<S> <C> <C>
5% STOCKHOLDERS:
Capital Guardian Trust Company..............................
11100 Santa Monica Blvd., 15th Floor
Los Angeles, CA 90025
EXECUTIVE OFFICERS AND DIRECTORS:
Monte M. Toole..............................................
Dave J. Toole...............................................
Asuri Raghavan..............................................
Kenneth M. Thompson.........................................
Kenneth L. Schroeder........................................
F. Joseph Van Poppelen......................................
Bill N. Alexander...........................................
Rammy Rasmussen.............................................
Graham W. Hills.............................................
Jerald J. Cutini............................................
John R. Villadsen...........................................
All directors and executive officers as a group (11
persons)( )..............................................
</TABLE>
-------------------------
* Less than 1%
(1)
(2)
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LEGAL MATTERS
The validity of the shares of Novellus common stock offered by this proxy
statement-prospectus and certain legal matters with respect to federal income
tax consequences in connection with the merger will be passed upon for Novellus
by Morrison & Foerster LLP, Palo Alto, California. Certain legal matters with
respect to federal income tax consequences in connection with the merger will be
passed upon for GaSonics by Brobeck, Phleger & Harrison LLP, Palo Alto,
California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Novellus Systems,
Inc.'s financial statements and schedule included in its Annual Report on Form
10-K for the year ended December 31, 1999, as set forth in their report, which
is incorporated by reference in this document. These financial statements and
schedule are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The consolidated financial statements of GaSonics International Corporation
included in GaSonics' Annual Report (Form 10-K) for the year ended September 30,
1999, and incorporated by reference in this proxy statement-prospectus, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports, with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
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WHERE YOU CAN FIND MORE INFORMATION
This proxy statement-prospectus includes information that has not been
delivered or presented to you but is "incorporated by reference," which means
that Novellus and GaSonics disclose information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is considered a part of this proxy statement-prospectus, except for
any information superseded by information provided in this proxy
statement-prospectus. This proxy statement-prospectus incorporates by reference
the documents listed below, which contain important information.
Novellus and GaSonics are also incorporating by reference any additional
documents that each files with the SEC as required by the Securities Exchange
Act of 1934 between the date of this proxy statement-prospectus and the date of
each of the special meetings of GaSonics and Novellus stockholders.
The following documents, which were filed by GaSonics with the SEC, are
incorporated by reference into this proxy statement-prospectus:
- GaSonics' Annual Report on Form 10-K for the fiscal year ended September
30, 1999;
- GaSonics' Quarterly Report on Form 10-Q for the quarter ended December
31, 1999;
- GaSonics' Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
- GaSonics' Registration Statement on Form S-3/A filed on May 19, 2000;
- GaSonics' Quarterly Report on Form 10-Q for the quarter ended June 30,
2000;
- GaSonics' Current Report on Form 8-K filed on September 27, 2000;
- GaSonics' Registration Statement on Form S-3/A filed on October 10, 2000;
- GaSonics' Current Report on Form 8-K filed on October 27, 2000;
- GaSonics' Current Report on Form 8-K/A filed on October 30, 2000;
- GaSonics' Current Report on Form 8-K filed on October 31, 2000;
- GaSonics' Current Report on Form 8-K/A filed on November 9, 2000; and
- the description of GaSonics common stock contained in GaSonics'
Registration Statement on Form 8-A filed on February 4, 1994, and any
amendment or report filed for the purpose of updating such description.
The following documents, which have been filed by Novellus with the SEC,
are incorporated by reference into this proxy statement-prospectus:
- Novellus' Annual Report on Form 10-K for the fiscal year ended December
31, 1999;
- Novellus' Quarterly Report on Form 10-Q for the quarter ended April 1,
2000;
- Novellus' Quarterly Report on Form 10-Q for the quarter ended July 1,
2000;
- Novellus' Quarterly Report on Form 10-Q for the quarter ended September
30, 2000;
- Novellus' Report on Form S-3 filed on April 5, 2000;
- Novellus' Current Report on Form 8-K filed on April 21, 2000;
- Novellus' Current Report on Form 8-K filed on November 1, 2000; and
- the description of Novellus common stock contained in Novellus'
Registration Statement on Form 8-A, filed on September 1, 1988, and any
amendment or report filed for the purpose of updating such description.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH NOVELLUS OR GASONICS HAVE REFERRED YOU. NEITHER NOVELLUS NOR GASONICS HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
Novellus and GaSonics each file reports, proxy statements and other
information with the SEC. Copies of Novellus' and GaSonics' reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York
Washington, D.C. 20549 Chicago, Illinois 60661 10048
</TABLE>
Reports, proxy statements and other information concerning GaSonics and
Novellus may also be inspected at:
The National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
You can also obtain copies of these materials by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at (800) SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding Novellus and GaSonics at http://www.sec.gov.
Novellus has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the SEC with respect to Novellus common stock to be
issued to GaSonics stockholders in the merger. This proxy statement-prospectus
constitutes the prospectus of Novellus filed as part of the registration
statement. This proxy statement-prospectus does not contain all of the
information set forth in the registration statement because parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement and its exhibits are available for
inspection and copying as described above.
If you have any questions about the merger, please call GaSonics at (408)
570-7400. You may also call Novellus Investor Relations at (408) 823-4823.
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ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NOVELLUS SYSTEMS, INC.,
NEPTUNE ACQUISITION-SUB, INC.
AND
GASONICS INTERNATIONAL CORPORATION
DATED AS OF OCTOBER 25, 2000
<PAGE> 96
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NOVELLUS SYSTEMS, INC.
NEPTUNE ACQUISITION-SUB, INC.
AND
GASONICS INTERNATIONAL CORPORATION
OCTOBER 25, 2000
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304-1018
<PAGE> 97
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER............................................... A-1
1.1 The Merger.................................................. A-1
1.2 Closing; Effective Time..................................... A-1
1.3 Effect of the Merger........................................ A-2
1.4 Certificate of Incorporation; Bylaws........................ A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-2
1.7 Surrender of Certificates................................... A-3
1.8 No Further Ownership Rights in Company Capital Stock........ A-5
1.9 Tax and Accounting Consequences............................. A-5
1.10 Withholding Rights.......................................... A-5
1.11 Taking of Necessary Action; Further Action.................. A-5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY............... A-5
2.1 Organization, Standing and Power............................ A-6
2.2 Capital Structure........................................... A-6
2.3 Authority................................................... A-7
2.4 SEC Documents, Financial Statements......................... A-8
2.5 Absence of Certain Changes.................................. A-9
2.6 Absence of Undisclosed Liabilities.......................... A-9
2.7 Litigation.................................................. A-9
2.8 Governmental Authorization.................................. A-9
2.9 Title to Personal Property.................................. A-10
2.10 Intellectual Property....................................... A-10
2.11 Environmental Matters....................................... A-11
2.12 Taxes....................................................... A-12
2.13 Employee Benefit Plans...................................... A-13
2.14 Certain Agreements Affected by the Merger................... A-15
2.15 Employee Matters............................................ A-15
2.16 Insurance................................................... A-16
2.17 Compliance with Laws........................................ A-16
2.18 Brokers' and Finders' Fees.................................. A-16
Affiliates Agreements; Stockholder Voting Agreements;
2.19 Irrevocable Proxies......................................... A-16
2.20 Vote Required............................................... A-17
2.21 Board Approval.............................................. A-17
2.22 Customers and Suppliers..................................... A-17
2.23 Material Contracts.......................................... A-17
2.24 No Breach of Material Contracts............................. A-18
2.25 Material Third Party Consents............................... A-18
2.26 Real Property............................................... A-18
2.27 Registration Statement; Proxy Statement/Proxy............... A-19
2.28 Tax Matters................................................. A-19
2.29 Opinion of Financial Advisor................................ A-19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB.................................................... A-19
3.1 Organization, Standing and Power............................ A-20
3.2 Capital Structure........................................... A-20
3.3 Authority................................................... A-21
3.4 SEC Documents; Financial Statements......................... A-21
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.5 Tax Matters................................................. A-22
3.6 Absence of Undisclosed Liabilities.......................... A-22
3.7 Litigation.................................................. A-22
3.8 Board and Shareholder Approval.............................. A-22
3.9 Registration Statement; Proxy Statement/Proxy............... A-22
3.10 Opinion of Financial Advisor................................ A-23
3.11 Investigation by Parent; Company's Liability................ A-23
3.12 Absence of Certain Changes.................................. A-23
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..................... A-23
4.1 Conduct of Business of Company.............................. A-23
4.2 Restriction on Conduct of Business of Company............... A-23
4.3 No Solicitation............................................. A-25
ARTICLE V ADDITIONAL AGREEMENTS.................................... A-27
5.1 Proxy Statement/Prospectus; Registration Statement.......... A-27
5.2 Meeting of Stockholders..................................... A-27
5.3 Access to Information; Disclosure Schedule Updates.......... A-27
5.4 Confidentiality............................................. A-28
5.5 Public Disclosure........................................... A-28
5.6 Consents; Cooperation....................................... A-28
5.7 Affiliates Agreements....................................... A-29
5.8 Stockholder Voting Agreement................................ A-30
5.9 FIRPTA...................................................... A-30
5.10 Legal Requirements.......................................... A-30
5.11 Employee Benefit Plans...................................... A-30
5.12 Indemnification............................................. A-32
5.13 Form S-8.................................................... A-33
5.14 NASDAQ Quotation............................................ A-33
5.15 Treatment as Reorganization................................. A-33
5.16 Takeover Statutes........................................... A-33
5.17 Pooling Accounting.......................................... A-33
5.18 Pooling Letters............................................. A-33
5.19 Notices..................................................... A-34
5.20 Listing of Additional Shares................................ A-34
5.21 Further Assurances.......................................... A-34
5.22 Rights Agreement............................................ A-34
ARTICLE VI CONDITIONS TO THE MERGER................................ A-34
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... A-34
6.2 Additional Conditions to Obligations of Company............. A-35
6.3 Additional Conditions to the Obligations of Parent.......... A-36
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................... A-36
7.1 Termination................................................. A-36
7.2 Effect of Termination....................................... A-37
7.3 Expenses and Termination Fees............................... A-37
7.4 Amendment................................................... A-38
7.5 Extension; Waiver........................................... A-39
ARTICLE VIII GENERAL PROVISIONS.................................... A-39
8.1 Non-Survival at Effective Time.............................. A-39
8.2 Notices..................................................... A-39
8.3 Interpretation; Certain Definitions......................... A-40
8.4 Counterparts; Facsimile Delivery............................ A-40
8.5 Entire Agreement; Nonassignability; Parties in Interest..... A-40
</TABLE>
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<PAGE> 99
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.6 Severability................................................ A-40
8.7 Remedies Cumulative......................................... A-40
8.8 Governing Law............................................... A-40
8.9 Rules of Construction....................................... A-40
8.10 Assignment.................................................. A-41
8.11 Attorneys' Fees............................................. A-41
</TABLE>
SCHEDULES
Company Disclosure Schedule
<TABLE>
<S> <C>
Schedule 2.2 -- Company Voting Agreements
Schedule 2.4 -- Company Balance Sheet
Schedule 2.6 -- Undisclosed Liabilities
Schedule 2.7 -- Company Litigation
Schedule 2.9 -- Company Assets
Schedule 2.10 -- Company Intellectual Property
Schedule 2.11 -- Company Environmental Matters
Schedule 2.13 -- Company Employee Benefit Plans
Schedule 2.22 -- Company Top 10 Customers
Schedule 2.23 -- List of Material Contracts
Schedule 2.25 -- Material Third Party Consents
Schedule 2.26 -- Real Property
</TABLE>
Parent Disclosure Schedule
<TABLE>
<S> <C>
Schedule 3.6 -- Undisclosed Liabilities
Schedule 3.7 -- Parent Litigation
</TABLE>
Other Schedules
<TABLE>
<S> <C>
Schedule 5.7(a) -- List of Company Affiliates
Schedule 5.7(b) -- List of Parent Affiliates
Schedule 5.11 -- Holders of Outstanding Company Options
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A -- Form of Certificate of Merger
Exhibit B-1 -- Form of Company Affiliates Agreement
Exhibit B-2 -- Form of Parent Affiliates Agreement
Exhibit C -- Form of Stockholder Voting Agreement
Exhibit D -- Confidentiality Agreement
Exhibit E -- Form of FIRPTA Notice
Exhibit F -- Form of IRS Notice
Exhibit G-1 -- Form of Certificate of Officer of Company
Exhibit G-2 -- Form of Certificate of Officer of Parent
</TABLE>
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<PAGE> 100
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
October 25, 2000 (the "Execution Date") by and among NOVELLUS SYSTEMS, INC., a
California corporation ("Parent"), NEPTUNE ACQUISITION-SUB, INC., a Delaware
corporation ("Merger Sub"), and GASONICS INTERNATIONAL CORPORATION, a Delaware
corporation ("Company").
RECITALS
A. The Boards of Directors of Parent, Merger Sub and Company each have
determined that the business combination between Parent and Company through the
merger of Merger Sub with and into Company pursuant to the terms and subject to
the conditions set forth herein (the "Merger") is in the best interests of their
respective companies, stockholders and shareholders.
B. Merger Sub is a wholly-owned subsidiary of Parent.
C. Pursuant to the Merger, among other things, each outstanding share of
capital stock of Company shall be converted into a fraction of a share of common
stock of Parent, at the rate set forth herein.
D. Company and Parent desire to make certain representations, warranties,
covenants and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code.
F. The parties intend that, for financial accounting purposes, the Merger
shall be accounted for as a pooling-of-interests.
G. As an inducement to Parent to enter into this Agreement, certain
officers, and directors of Company have concurrently herewith entered into an
agreement to vote the shares of Company's Capital Stock owned by such persons to
approve the Merger and this Agreement.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and conditions
set forth in this Agreement, at the "Effective Time" (as defined in Section 1.2
hereof), Merger Sub shall be merged with and into Company, which shall be the
surviving corporation (the "Surviving Corporation") in the Merger, and the
separate existence of Merger Sub shall thereupon cease. The name of the
Surviving Corporation shall remain "Globe Corporation." The Merger shall have
the effects set forth in the applicable provisions of the Delaware General
Corporation Law ("Delaware Law").
1.2 Closing; Effective Time. The closing of the transactions contemplated
hereby (the "Closing") shall take place as soon as practicable and in any event
not later than two business days after the satisfaction or waiver of each of the
conditions set forth in Article VI hereof or at such other time as the parties
hereto agree (the "Closing Date"). The Closing shall take place at the offices
of Morrison & Foerster, LLP, 755 Page Mill Road, Palo Alto, California, or at
such other location as the parties hereto agree. In connection with the Closing,
the parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger, in the form attached hereto as Exhibit A (the
"Certificate of Merger"), together with the required officers' certificates,
with the Secretary of State of the State of Delaware, in accordance with the
relevant provisions of Delaware Law (the time of such filing with the Secretary
of State of Delaware being the "Effective Time").
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1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company and the Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Company and
the Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Company,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by Delaware Law and such Certificate of Incorporation; provided, that
as of the Effective Time, Company's Certificate of Incorporation shall be
amended as set forth in Exhibit A to the Certificate of Merger.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by Delaware Law and such Bylaws.
1.5 Directors and Officers. At the Effective Time, the directors of Merger
Sub, serving in such capacity immediately prior to the Effective Time, shall be
the directors of the Surviving Corporation, until their respective successors
are duly elected or appointed and qualified. The officers of Merger Sub, holding
office immediately prior to the Effective Time, shall be the officers of the
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock.
(a) Certain Definitions.
"Company Capital Stock" shall mean all outstanding shares of Company
Common Stock and all outstanding shares of any other capital stock of Company as
of the Effective Time.
"Company Common Stock" shall mean shares of the common stock of
Company, $0.001 par value.
"Company ESPP" shall mean the Company 1994 Employee Stock Purchase
Plan.
"Company Options" shall mean any and all options or other rights to
purchase or otherwise acquire shares of Company Capital Stock, whether or not
presently exercisable or subject to additional conditions prior to exercise,
under and pursuant to the (i) Company Supplemental Stock Option Plan, (ii)
Company 1994 Stock Option/Stock Issuance Plan, and (iii) Gamma Precision
Technology 1998 Stock Option Plan (each, a "Company Stock Option Plan," and
collectively, the "Company Stock Option Plans").
"Company Convertible Securities" shall mean any and all warrants,
rights or other convertible securities to purchase or otherwise acquire shares
of Company Capital Stock, whether or not presently exercisable or subject to
additional conditions prior to exercise, not including the Company Options.
"Exchange Ratio" shall mean 0.52 as may be adjusted pursuant to
Section 1.6(e) hereof.
"Parent Common Stock" shall mean shares of the common stock of
Parent, no par value.
(b) Conversion of Company Capital Stock. By virtue of the Merger and
without any further action on the part of Parent, Company, the Merger Sub or the
holders of any of Company's securities, at the Effective Time, each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time, but excluding any shares canceled pursuant to Section 1.6(c), will be
automatically canceled, extinguished and converted into the right to receive a
fraction of a share of Parent Common Stock equal to the Exchange Ratio and cash
in lieu of fractional shares in accordance with Section 1.6(f).
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(c) Cancellation of Company Capital Stock Owned by Company. At the
Effective Time, all shares of Company Capital Stock that are owned by Company as
treasury stock and each share of Company Capital Stock owned by Parent or any
direct or indirect wholly-owned subsidiary of Company or Parent shall be
canceled and extinguished without any rights to conversion thereof and no
consideration shall be delivered in exchange therefore. At the Effective Time,
any shares of Company Capital Stock that are owned by Parent, Merger Sub or any
other wholly-owned subsidiary of Parent shall be canceled and retired and
extinguished without any conversion thereof and no consideration shall be
delivered in exchange therefor.
(d) Treatment of Company Options and Company ESPP Rights. (i) at the
Effective Time, the Company Stock Option Plans and all Company Options then
outstanding under the Company Stock Option Plans shall be assumed by Parent and
converted into Parent Options in accordance with Section 5.11 hereof; and (ii)
all purchase rights for shares of Company Common Stock outstanding under the
Company ESPP immediately prior to the Effective Time shall be exercised in
accordance with Section 5.11(b) hereof, and the purchased shares of Company
Common Stock shall at the Effective Time be converted into shares of Parent
Common Stock and cash in lieu of fractional shares, as provided in Section
1.6(c) hereof.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall only be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Capital Stock), reclassification,
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Capital Stock occurring after the date hereof and prior
to the Effective Time, so as to provide holders of Company Common Stock and
Parent the same economic effect as contemplated by this Agreement prior to such
stock split, reverse split, stock dividend, reorganization, recapitalization,
like change or increase.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall receive from Parent an amount of cash (rounded to
the nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average closing price per share of Parent's Common Stock as quoted on
Nasdaq for the twenty (20) trading days ending on the day which is two days
before the Closing Date, less any amount required to be withheld under foreign,
federal, state or local tax laws.
(g) Capital Stock of Merger Sub. At the Effective Time, each share of
common stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent, ChaseMellon Shareholder
Services, shall act as the exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Parent shall use
commercially reasonable efforts to make available to the Exchange Agent
promptly, but in no event later than three (3) business days after the Effective
Time, for exchange in accordance with this Article I, through such reasonable
procedures as Parent may adopt, (i) the shares of Parent Common Stock issuable
pursuant to Section 1.6(b) (provided that delivery of any shares that are
subject to vesting shall be in book entry form only until such vesting
restrictions have lapsed) in exchange for shares of Company Capital Stock
outstanding immediately prior to the Effective Time, and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares pursuant to
Section 1.6(f), less any amounts required to be withheld from such cash under
foreign, federal, state or local laws.
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(c) Exchange Procedures.
(i) Parent shall use commercially reasonable efforts to cause to be
mailed, as soon as reasonably practical, but within ten (10) business days, to
each holder of record of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding shares of
Company Capital Stock, whose shares were converted into the right to receive
shares of Parent Common Stock (and cash in lieu of fractional shares, less any
amount required to be withheld from such cash under foreign, federal, state or
local tax laws), (1) a letter of transmittal in customary form (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the Certificates by the Exchange
Agent, and shall be in such form and have such other provisions as Parent may
reasonably specify), and (2) instructions for use in effecting the surrender of
the Certificates in exchange for certificates (or book entries in the case of
shares that have not yet vested) representing shares of Parent Common Stock (and
cash in lieu of fractional shares, less any amount required to be withheld from
such cash under foreign, federal, state or local tax laws).
(ii) Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, (A) the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate (or a book entry
in the case of shares that have not yet vested in full) representing the number
of whole shares of Parent Common Stock equal to the product of (i) the number of
Company shares represented by such certificate multiplied by (ii) the Exchange
Ratio, and, if applicable, payment in lieu of fractional shares which such
holder has the right to receive pursuant to Section 1.6(f), and (B) the
Certificate so surrendered shall forthwith be canceled.
(iii) In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the stockholder
claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent
will issue or cause to be issued to such Person in exchange for such lost,
stolen or destroyed Certificate, a new certificate into which the shares of such
Person's Company Capital Stock that are converted on the Effective Date and/or,
if applicable, deliver or cause to be delivered to such Person a check in
respect of any fractional share interests or dividends or distributions, which
such Person shall be entitled to receive pursuant to Section 1.6(f). When
authorizing such issuance in exchange therefor, Parent and/or the Exchange Agent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to give Parent
and/or the Exchange Agent a reasonable form of bond as indemnity, as it shall
direct, against any claim that may be made against Parent or the Exchange Agent
with respect to the Certificate alleged to have been lost, stolen or destroyed.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the Certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of any such dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.7(d)) with respect to such shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Person requesting such
exchange will have paid to the Exchange Agent, Parent or any other agent
designated by Parent, as applicable, any transfer or other taxes required by
reason of the issuance of a certificate for shares of Parent Common Stock in any
name other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of the
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Exchange Agent, Parent or any other agent designated by Parent, as applicable,
that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, none of the Exchange Agent, Parent, the Surviving Corporation or
any other party hereto shall be liable to any Person for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.8 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and after the Effective Time there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Capital Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be exchanged and canceled as provided in this Article I.
1.9 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall (a) constitute a reorganization within the meaning of
Section 368 of the Code and (b) qualify for accounting treatment as a
pooling-of-interests. The parties to this Agreement hereby adopt this Agreement
as a "plan of reorganization" within the meaning of sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.10 Withholding Rights. Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the number of shares of Parent Common Stock
otherwise deliverable under this Agreement, and from any other payments made
pursuant to this Agreement, such amounts as Parent and the Surviving Corporation
are required to deduct and withhold with respect to such delivery and payment
under the Code or any provision of state, local, provincial or foreign tax law.
To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been delivered and paid to
the holder of shares of Company Common Stock in respect of which such deduction
and withholding was made by Parent and the Surviving Corporation.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company, the officers and directors of Company, Parent and the
Surviving Corporation are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity and its
subsidiaries taken as a whole.
In this Agreement, any reference to a "Company Material Adverse Effect"
means any change, event or effect that is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of Company and its
subsidiaries, taken as a whole; provided, however, that none of the following
shall be deemed in themselves, either alone or in combination, to constitute,
and none of the following shall be taken into account in determining whether
there has been or will be, a Company Material Adverse Effect: (a) any change in
the market price or trading volume of Company's stock after the date hereof; (b)
any adverse change, effect, event, occurrence, state of facts or development to
the extent attributable to the announcement or pendency of
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the Merger (including any cancellation of or delays in customer orders, any
reduction in sales, any disruption in supplier, distributor, partner or similar
relationships or any loss of employees); (c) any adverse change, effect, event,
occurrence, state of facts or development attributable to conditions affecting
the industries as a whole in which Company participates, the U.S. economy as a
whole or the foreign economies as a whole in any locations where Company or any
of its Subsidiaries has material operations or sales; or (d) any adverse change,
effect, event, occurrence, state of facts or development arising from or
relating to compliance with the terms of, or the taking of any action required
by, this Agreement.
In this Agreement, any reference to a party's "knowledge" means actual
knowledge of such party's officers and directors, provided that officers shall
have made reasonable due and diligent inquiry of those employees of such party
whom such officers reasonably believe would have actual knowledge of the matters
represented.
In this Agreement, any reference to a party conducting its business or
other affairs or taking any action in the "ordinary course of business" means
that such an action taken by or on behalf of such party shall not be deemed to
have been taken in the "ordinary course of business" unless such action is taken
in the ordinary course of such party's normal day to day operations and is
similar in nature and magnitude to actions customarily taken, without any
separate or special authorization.
Except as disclosed in a document of even date herewith and attached to
this Agreement and delivered by Company to Parent prior to the execution and
delivery of this Agreement and referring by section number to the
representations and warranties in this Agreement (the "Company Disclosure
Schedule"), provided that any disclosure shall qualify the disclosure under the
section number referred to in the Company Disclosure Schedule as well as all
other sections in this Agreement, when it is reasonably apparent from a reading
of such disclosure that it also qualifies or applies to such other sections,
provided further that Company shall make all reasonable efforts to specifically
cross reference in the Company Disclosure Schedule all sections where a
particular disclosure qualifies or applies, Company represents and warrants to
Parent as follows:
2.1 Organization, Standing and Power. Each of Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Company and its subsidiaries
has the corporate power to own its properties and to carry on its business as
now being conducted and as currently proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Company
Material Adverse Effect. Company has delivered or made available a true and
correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of Company and each of its subsidiaries, each as
amended to date, to Parent. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents. Company is the owner of all outstanding
shares of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. Except as disclosed in
the Company SEC Documents (as defined in Section 2.4 hereof), Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity, excluding securities in any publicly traded company held for investment
by Company or any of it subsidiaries in accordance with and pursuant to the
Company's formal investment policy and comprising less than 5% of the
outstanding stock of such company.
2.2 Capital Structure.
(a) The authorized capital stock of Company consists of 60,000,000
shares of Common Stock, par value $0.001 per share, of which there were
17,690,241 shares issued and outstanding as of the close of business on the day
two days prior to the Execution Date. On the Execution Date, there are no other
outstanding shares of capital stock or voting securities, and as of the
Effective Time there will be no, outstanding commitments to issue any shares of
capital stock or voting securities, other than pursuant to the exercise of
Company Options outstanding as of such date under the Company Stock Option
Plans, outstanding as of the Execution Date.
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(b) All outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances, other than any liens or encumbrances created by or imposed upon
the holders thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Certificate of Incorporation or Bylaws of
Company or any agreement to which Company is a party or by which it is bound.
All outstanding shares of Company Capital Stock were issued in compliance in all
material respects with all applicable federal and state securities laws. As of
the date hereof, Company has reserved (i) 200,000 shares of Common Stock for
issuance to directors, employees and consultants pursuant to the Company
Supplemental Stock Option Plan, of which no shares have been issued pursuant to
option exercises or direct stock purchases, no shares are subject to
outstanding, unexercised options, and 200,000 shares are available for issuance
thereunder; (ii) 3,650,000 shares of Common Stock for issuance to directors,
employees and consultants pursuant to the Company 1994 Stock Option/Stock
Issuance Plan, of which 1,055,555 shares have been issued pursuant to option
exercises or direct stock purchases, 2,581,957 shares are subject to
outstanding, unexercised options, and 12,488 shares are available for issuance
thereunder; (iii) 64,769 shares of Common Stock for issuance to directors,
employees and consultants pursuant to the Gamma Precision Technology 1998 Stock
Option Plan, of which no shares have been issued pursuant to option exercises or
direct stock purchases, no shares are subject to outstanding, unexercised
options, and 64,769 shares are available for issuance thereunder; and (iv)
1,100,000 shares of Common Stock for issuance to pursuant to the Company ESPP,
of which 920,688 shares have been issued. On the Execution Date, except for (i)
the rights created pursuant to this Agreement and the Company Stock Option
Plans, and (ii) Company's right to repurchase any unvested shares under the
Company Stock Option Plans or the stock option agreements thereunder, there are
no, and as of the Effective Time, there will be no, other options, warrants,
calls, rights, commitments or agreements of any character to which Company is a
party or by which it is bound obligating Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Company Capital Stock or obligating Company to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement,
except as may be permitted under Section 4.2 hereof. Except for the agreements
contemplated by this Agreement and the agreements set forth on Schedule 2.2(b)
to the Company Disclosure Schedule, there are no contracts, commitments or
agreements relating to voting, purchase or sale of Company Capital Stock (i)
between or among Company and any of its securityholders and (ii) to Company's
knowledge, between or among any of Company's securityholders.
(c) The terms of the Company Stock Option Plans permit the assumption of
the Company Options by Parent as provided for in this Agreement, without the
consent or approval of the holders of the Company Stock Options, the Company
Stockholders, or otherwise, without any acceleration of the exercise schedule or
vesting provisions with respect to those options. The current "Purchase Period,"
as defined in the Company ESPP commenced under the Company ESPP on June 30, 2000
and will end prior to the Effective Time as provided in this Agreement, and
except for the purchase rights granted on such commencement date to participants
in the current Purchase Period, there are no other purchase rights or options
outstanding under the Company ESPP. Except as set forth on Schedule 2.2(c), none
of the outstanding Company Options permit any accelerated vesting or
exercisability of those options by reason of the Merger or any other
transactions contemplated by this Agreement. True and complete copies of all
agreements and instruments relating to or issued under the Company Stock Option
Plans, or otherwise relating to the issuance of Company Options have been
provided or made available to Parent and such agreements and instruments have
not been amended, modified or supplemented, and, except as otherwise expressly
contemplated herein, there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the forms provided to Parent.
2.3 Authority.
(a) Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, other than approval by the Company
stockholders.
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(b) This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company enforceable against
Company by Parent in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally and by
general principles of equity. The execution and delivery of this Agreement by
Company does not, and the execution of the other agreements contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not, conflict with or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Certificate of Incorporation or Bylaws of
Company, as amended, or (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Company or any of its properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions in subsection (ii) would not be reasonably expected to
have a Company Material Adverse Effect.
(c) Except as would not otherwise have a Company Material Adverse
Effect, no consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, foreign, federal, state or
local (each, a "Governmental Entity") is required with respect to Company in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 1.2, (ii) the filing with the Securities and Exchange
Commission (the "SEC") and the National Association of Securities Dealers, Inc.
("NASD") of the Proxy Statement (as defined in Section 2.29) relating to the
Company Stockholders Meeting (as defined in Section 2.29), (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws and the securities laws
of any foreign country, (iv) such filings as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"); (v)
the filing of a Form S-4 Registration Statement with the SEC in accordance with
the Securities Act of 1933 (the "Securities Act"), as amended; (vi) the filing
of a current report on Form 8-K with the SEC; (vii) any notice described in
Section 5.19 hereof; and (viii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not prevent,
materially alter or delay any of the transactions contemplated by this
Agreement.
2.4 SEC Documents, Financial Statements.
(a) Company has made available to Parent a true and complete copy of
each statement, report, registration statement (with the prospectus in the form
filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filings filed with the SEC by Company (collectively, the
"Company SEC Documents"). In addition, Company has made available or provided to
Parent complete copies of all exhibits to the Company SEC Documents filed prior
to the date hereof, and will promptly make available to Parent all exhibits to
any additional Company SEC Documents filed prior to the Effective Time. To the
knowledge of Company, all documents required to be filed as exhibits to the
Company SEC Documents have been so filed. As of their respective filing dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act and, to Company's knowledge, none of the Company
SEC Documents contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected, supplemented or superseded by a
subsequently filed Company SEC Document.
(b) The financial statements of Company, including the notes thereto,
included in the Company SEC Documents (the "Company Financial Statements") and
the unaudited balance sheet of Company, dated as of June 30, 2000 (the "Company
Balance Sheet Date") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as
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of their respective dates, and have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other (except as may
be indicated in the notes thereto or, in the case of unaudited statements,
included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the
SEC). The Company Financial Statements fairly present the consolidated financial
condition and operating results of Company as of the dates and for the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments). There has been no change in Company accounting
policies except as described in the notes to the Company Financial Statements.
2.5 Absence of Certain Changes. Except as set forth in the Company SEC
Documents prior to the date hereof or as expressly contemplated by this
Agreement, since the Company Balance Sheet Date there has not occurred, (except
as permitted by Section 4.2 hereof): (i) any change, event or condition (whether
or not covered by insurance or similar indemnification agreement) that has
resulted in, or would reasonably be expected to result in, a Company Material
Adverse Effect, (ii) any acquisition, sale or transfer of any material asset of
Company or any of its subsidiaries, (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Company or any revaluation by Company of any of its or any of its
subsidiaries' assets, (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Company, or any
direct or indirect redemption, purchase or other acquisition by Company of any
of its shares of capital stock, (v) any action to amend or change the
Certificate of Incorporation or Bylaws of Company, or (vi) any negotiation or
agreement by Company or any of its subsidiaries to do any of the things
described in the preceding clauses (i) through (v) (other than negotiations with
Parent and its representatives regarding the transactions contemplated by this
Agreement).
2.6 Absence of Undisclosed Liabilities. Except as set forth on Schedule
2.6, Company has no material obligations or liabilities of any nature (matured
or unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the balance sheet or in the notes to the Company Financial
Statements included in the Company Financial Statements in Company's Quarterly
Report on Form 10-Q for the period ended on the Company Balance Sheet Date, (ii)
those incurred in the ordinary course of business since the Company Balance
Sheet Date, (iii) those incurred in connection with the execution of this
Agreement, and (iv) those disclosed on Schedule 2.6.
2.7 Litigation. Except as set forth in the Company SEC Documents, as of
the date of this Agreement, there is no material private or governmental action,
suit, proceeding, claim, arbitration, governmental investigation, or to the
knowledge of Company any private investigation, pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Company or any of its
subsidiaries, threatened against Company, any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such). There is no judgment, decree or order against Company
or any of its subsidiaries, or, to the knowledge of Company, or any of its
subsidiaries, or any of their respective directors or officers (in their
capacities as such), that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement, or that could reasonably
be expected to have a Company Material Adverse Effect. Schedule 2.7 of the
Company Disclosure Schedule also lists all material litigation that Company has
pending as of the date of this Agreement against other parties which is not
disclosed in the Company SEC Documents.
2.8 Governmental Authorization. Company and each of its subsidiaries, has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Company or any of its subsidiaries currently operates or holds
any interest in any of its properties or (ii) that is required for the operation
of Company's or any of its subsidiaries' business or the holding of any such
interest ((i) and (ii) herein collectively called the "Company Authorizations"),
and all of such Company Authorizations are in full force and effect, except
where the failure to obtain or have any such Company Authorizations could not
reasonably be expected to have a Company Material Adverse Effect.
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2.9 Title to Personal Property. Company and each of its subsidiaries has
good, valid and marketable title to all of their respective material personal
properties, interests in material personal properties and material assets
reflected in the Company Balance Sheet or acquired after the Company Balance
Sheet Date, which properties and assets with a book value of $200,000 or above
are listed on Schedule 2.9 (except properties, interests in properties and
assets sold or otherwise disposed of since the Company Balance Sheet Date in the
ordinary course of business), or with respect to leased properties and assets,
valid leasehold interests, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) a lien for current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which are reflected on the Company Balance Sheet, and (iv) liens
that in the aggregate would not have a Material Adverse Effect on Company. To
Company's knowledge, the material plants, property and equipment of Company that
are used in the operations of its business are in good operating condition and
repair, subject to normal wear and tear. All personal properties used in the
operations of Company are reflected in the Company Balance Sheet to the extent
GAAP requires the same to be reflected.
2.10 Intellectual Property.
(a) Company and its subsidiaries own (free and clear of all liens and
encumbrances), or are licensed or have valid rights to use (or otherwise possess
legally enforceable rights to use) all the U.S. or foreign patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, domain name, fictitious business name, service mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered and whether or not relating to a published
work), copyright registration application, maskwork, maskwork registration
application, trade secret, know how, rights in data or databases, invention, or
other proprietary right, all licenses, sublicenses and agreements related to the
foregoing, and any other intellectual property right or intangible asset
("Intellectual Property") that is used, subject to a pending application for
registration, or necessary for the conduct of the business of Company and its
subsidiaries as currently conducted or proposed to be conducted by Company and
its subsidiaries.
(b) Neither Company nor its subsidiaries has (i) to the knowledge of
Company, licensed any of its Intellectual Property in source code form to any
party, (ii) entered into any exclusive agreements relating to its Intellectual
Property with any party, or (iii) to the knowledge of Company, entered into any
source code escrow agreements. To the knowledge of Company, the source code and
system documentation relating to any software included in the Intellectual
Property have at all times been maintained in confidence and have been disclosed
only to employees and consultants having a "need to know" of the contents
thereof in connection with their duties to Company or its subsidiaries and such
employees and consultants have executed appropriate confidentiality agreements
in connection therewith.
(c) Schedule 2.10(c) lists (i) all issued patents, all registered and
common law trademarks, all registered and common law trade names, all registered
and common law service marks, all registered and common law copyrights, all
registered maskworks, and all pending applications relating to any of the
foregoing all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, and maskworks, included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses and other
agreements as to which Company or its subsidiaries is a party and pursuant to
which any Person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which Company or its
subsidiaries is a party and pursuant to which Company or any subsidiary is
authorized to use any third party Intellectual Property, other than end-user
licenses entered into in the ordinary course of business relating to
off-the-shelf "shrink-wrap" software with a purchase price per copy of less than
$10,000 ("Third Party Intellectual Property Rights").
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(d) To the best of Company's knowledge, there is no, nor has there been
any, unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of Company or any of its subsidiaries, or any Third
Party Intellectual Property Rights, by any third party, including any employee
or former employee of Company or any subsidiary. Neither Company nor any
subsidiary has entered into any agreement to indemnify any other Person against
any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders or license agreements
arising in the ordinary course of business, containing such terms as are typical
for the business, services and products of Company.
(e) To the best of Company's knowledge, Company is not, nor will it be
as a result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in material breach of any license,
sublicense or other agreement to which it is a party relating to the
Intellectual Property or Third Party Intellectual Property Rights.
(f) To the best of Company's knowledge, all patents and registered
trademarks, service marks and copyrights held by Company or any of its
subsidiaries are valid and subsisting. To the best of Company's knowledge,
neither Company nor any of its subsidiaries are infringing and has at any time
infringed (either through the conduct of its business or by the manufacturing,
marketing, licensing, use or sale of its products and services) any license,
patent, copyright, service mark, trademark, trade name, trade secret or other
Intellectual Property or proprietary rights of any other Person or third party.
Neither Company nor any of its subsidiaries has received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of any Intellectual Property or other proprietary right
owned or licensed to any other Person or third party. Neither Company nor any of
its subsidiaries has been sued or threatened to be sued in any suit, action or
proceeding that involves a claim of infringement or violation of any
Intellectual Property or other proprietary right of any third party. Neither
Company nor any of its subsidiaries has brought any action, suit or proceeding
for infringement of Intellectual Property of Company or any of its subsidiaries
or breach of any license or agreement involving Intellectual Property of Company
or any of its subsidiaries against any third party which is not disclosed in the
Company SEC Documents.
(g) To the best of Company's knowledge, Company has secured valid
written assignments from all consultants and employees who contributed to the
creation or development of the Intellectual Property of the rights to such
contributions that Company does not already own by operation of law.
(h) To the best of Company's knowledge, Company has taken necessary and
appropriate steps to protect and preserve the confidentiality of all
Intellectual Property not otherwise protected by patents, patent applications or
copyrights ("Confidential Information"). To the best of Company's knowledge, all
use, disclosure or appropriation of Confidential Information owned by Company by
or to a third party has been pursuant to the terms of a written agreement
between Company and such third party. To the best of Company's knowledge, all
use, disclosure or appropriation of Confidential Information not owned by
Company has been pursuant to the terms of a written agreement between Company
and the owner of such Confidential Information, or is otherwise lawful.
(i) Schedule 2.10(i) of the Disclosure Schedule, sets forth all actions
that must be taken by Company by February 28, 2001 that, if not taken, will
result in the loss of any Intellectual Property, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to the
United States Patent and Trademark Office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or
preserving or renewing any Intellectual Property.
2.11 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state or
local laws, ordinances, codes, regulations, rules, policies and orders that are
intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to,
Hazardous Materials or releases (as defined in 42 U.S.C. sec. 9601(22)) of
Hazardous Materials to air,
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water or groundwater, or which are intended to assure the health and safety of
employees, workers or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes or regulated under any Environmental and Safety
Laws.
(iii) "Property" shall mean all real property leased or owned by
Company or its subsidiaries either currently or in the past, including the
Leased Premises (as defined in Section 2.32).
(iv) "Facilities" shall mean all buildings and improvements on the
Property.
(b) Company represents and warrants as follows: (i) to its knowledge, no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities, (ii) all Hazardous Materials and wastes have been disposed
of in accordance with all Environmental and Safety Laws, (iii) neither Company
nor any subsidiary has received notice (oral or written) of any noncompliance of
the Facilities or its past or present operations with Environmental and Safety
Laws by Company or any such subsidiary, (iv) no notices, administrative actions
or suits are pending or, to Company's knowledge, threatened relating to a
violation of any Environmental and Safety Laws, (v) to Company's knowledge,
Company is not a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), or state analog
statute, arising out of events occurring prior to the Closing Date, (vi) there
are not now, nor to the best of Company's knowledge, have there been in the
past, any Hazardous Materials on, under or migrating to or from the Facilities
or Property, (vii) there are not now, nor to the best of Company's knowledge,
have there been in the past any underground tanks or underground improvements
at, on or under the Property, including without limitation, treatment or storage
tanks, sumps, or water, gas or oil wells, (viii) to Company's knowledge, there
are no polychlorinated biphenyls (PCBs) deposited, stored, disposed of or
located on the Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of fifty (50) parts per million, (ix) there
is no formaldehyde on the Property or in the Facilities, nor any insulating
material containing urea formaldehyde in the Facilities, (x) Company's uses and
activities in and of the Facilities have at all times complied in all material
respects with all Environmental and Safety Laws, and (xi) except as disclosed on
Schedule 2.11(b) Company has all the permits and licenses required to be issued
under Federal, State or local laws regarding Environmental and Safety Laws and
is in full compliance with the terms and conditions of those permits except
where such non-compliance would not have a Company Material Adverse Effect.
2.12 Taxes.
(a) Company and each of its subsidiaries has timely filed all Tax
Returns (as defined below) that it was required to file, and such Tax Returns
are true, correct and complete in all material respects. All Taxes (as defined
below) shown to be payable on such Tax Returns or on subsequent assessments with
respect thereto have been paid in full on a timely basis, and no other Taxes are
payable by Company or any subsidiary with respect to any period ending prior to
the date of this Agreement, whether or not shown due or reportable on such Tax
Returns, other than Taxes for which adequate accruals have been provided in the
Company Financial Statements or amounts payable with respect to periods or
portions of periods after the Company Balance Sheet Date. Company and each of
its subsidiaries has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto. Neither Company nor any subsidiary has any material liability for
unpaid Taxes accruing after the date of its latest Financial Statements except
for Taxes incurred in the ordinary course of business. Except as disclosed in
the Company SEC Documents, there are no liens for Taxes on the properties of
Company or any of its subsidiaries, other than liens for Taxes not yet due and
payable.
(b) Except as disclosed in the Company SEC Documents, no Tax Returns of
Company or any subsidiary have been audited. Company has delivered or made
available to Parent correct and complete copies of all Tax Returns filed,
examination reports, and statements of deficiencies assessed or agreed to by
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Company or any of its subsidiaries for the last five (5) years. Except as
disclosed in the Company SEC Documents, neither Company nor any of its
subsidiaries has waived any statute of limitations in respect of any Tax or
agreed to an extension of time with respect to any Tax assessment or deficiency.
(c) Except as disclosed in the Company SEC Documents, neither Company
nor any of its subsidiaries is a party to or bound by any tax indemnity
agreement, tax sharing agreement or similar contract. Neither Company nor any of
its subsidiaries is a party to any joint venture, partnership, or other
arrangement or contract which could be treated as a partnership or "disregarded
entity" for United States federal income tax purposes.
(d) Neither Company nor any of its subsidiaries is obligated under any
agreement, contract or arrangement that may result in the payment of any amount
that would not be deductible by reason of Sections 162(m) or 280G of the Code.
(e) Neither Company nor any of its subsidiaries has been or, to its
knowledge, will be required to include any material adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger other
than any such adjustments required as a result of the Merger. Neither Company
nor any of its subsidiaries has filed or will file any consent to have the
provisions of paragraph 341(f) of the Code (or comparable provisions of any
state Tax laws) apply to Company or such subsidiaries. Neither Company nor any
of its subsidiaries has filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return. Neither
Company nor any of its subsidiaries is currently or has been a United States
real property holding corporation (within the meaning of Section 897(c)(2) of
the Code) during the applicable periods specified in Section 897(c)(1)(A)(ii) of
the Code.
(f) Neither Company nor any of its subsidiaries has incurred any
liability for Taxes pursuant to Section 1374 or 1375 of the Code (and any
predecessor provision and any similar provision of applicable state or local or
other Tax law).
(g) Neither Company nor any of its subsidiaries has been the
"distributing corporation" (within the meaning of Section 355(c)(2) of the Code)
with respect to a transaction described in Section 355 of the Code within the
three (3) year period ending as of the date of this Agreement.
(h) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period, and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of being a transferee of or successor to
any Person, or as a result of any express or implied obligation to indemnify any
other Person. As used herein, "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
2.13 Employee Benefit Plans.
(a) The following terms shall be defined as follows:
(i) "Defined Benefit Plan" shall mean either a plan described in
Section 3(35) of ERISA or a plan subject to the minimum funding standards set
forth in Section 302 of ERISA and Section 412 of the Code.
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(ii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
(iii) "Member of the Controlled Group" shall mean each trade or
business, whether or not incorporated, that would be treated as a single
employer with Company under Section 4001 of ERISA or Section 414(b), (c), (m) or
(o) of the Code.
(iv) "Multiemployer Plan" shall mean a plan described in Section
3(37) of ERISA.
(b) Schedule 2.13(b) lists (i) all material "employee benefit plans"
within the meaning of Section 3(3) of ERISA, (ii) all employment agreements,
including, but not limited to, any individual benefit arrangement, policy or
practice with respect to any current or former employee or director of Company
or Member of the Controlled Group, and (iii) all other employee benefit, bonus
or other incentive compensation, stock option, stock purchase, stock
appreciation, severance pay, lay-off or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which
Company or any Member of the Controlled Group maintains, to which any of them
contributes, or for which any of them has any obligation or liability
(collectively, the "Plans").
(c) None of the Plans is a Defined Benefit Plan, and neither Company nor
any Member of the Controlled Group has ever sponsored, maintained or contributed
to, or ever been obligated to contribute to, a Defined Benefit Plan.
(d) None of the Plans is a Multiemployer Plan, and neither Company nor
any Member of the Controlled Group has ever contributed to, or ever been
obligated to contribute to, a Multiemployer Plan.
(e) Company does not maintain or contribute to any plan that provides
health benefits to an employee after the employee's termination of employment or
retirement except as required under Section 4980B of the Code and Sections 601
through 608 of ERISA.
(f) Each Plan which is an "employee benefit plan," as defined in Section
3(3) of ERISA, complies in all material respects by its terms and in operation
with the requirements provided by any and all statutes, orders or governmental
rules and regulations currently in effect and applicable to the Plan, including
but not limited to ERISA and the Code.
(g) All reports, forms and other documents required to be filed with any
government entity or furnished to employees, former employees or beneficiaries
with respect to any Plan (including without limitation, summary plan
descriptions, Forms 5500 and summary annual reports) have been timely filed and
furnished and are accurate, except for those instances which, either
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(h) Each of the Plans that is intended to qualify under Section 401(a)
of the Code has been determined by the Internal Revenue Service so to qualify
after January 1, 1989, and each trust maintained pursuant thereto has been
determined by the Internal Revenue Service to be exempt from taxation under
Section 501 of the Code. Nothing has occurred since the date of the Internal
Revenue Service's favorable determination letter that could adversely affect the
qualification of the Plan and its related trust. Company and each Member of the
Controlled Group have timely amended and operated each of the Plans to comply
with the Small Business and Job Protection Act of 1996 and subsequent
legislation enacted through the date hereof, and Section 501 of the Code.
(i) All contributions for all periods ending prior to the Closing Date
(including periods from the first day of the current plan year to the Closing
Date) have been made prior to the Closing Date by Company or have been reserved
against on the Company Financial Statements.
(j) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Plans for plan years ending on or before the Closing
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Date, except for those instances which, either individually or in the aggregate,
would not have a Company Material Adverse Effect.
(k) With respect to each Plan: (i) to Company's knowledge, no prohibited
transactions (as defined in Section 406 or 407 of ERISA or Section 4975 of the
Code) have occurred for which a statutory exemption is not available; (ii) no
action or claims (other than routine claims for benefits made in the ordinary
course of Plan administration for which Plan administrative review procedures
have not been exhausted) are pending, or to the knowledge of Company, threatened
or imminent against or with respect to the Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary (as defined
in Section 3(21) of ERISA), of the Plan; (iii) neither Company, nor any
fiduciary has any knowledge of any facts that could give rise to any such action
or claim; and (iv) it provides that it may be amended or terminated at any time
and, except for benefits protected under Section 411(d) of the Code, all
benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by Company at any time without liability other than
ordinary administrative expenses.
(l) Neither Company nor, to the knowledge of Company, any Member of the
Controlled Group has any material liability or is, to the knowledge of Company,
threatened with any material liability (whether joint or several) (i) for any
excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or
(ii) to a fine under Section 502 of ERISA.
(m) All of the Plans, to the extent applicable, are in material
compliance with the continuation of group health coverage provisions contained
in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(n) True, correct and complete copies of all documents creating or
evidencing any Plan have been delivered or made available to Purchaser, and
true, correct and complete copies of all reports, forms and other documents
required to be filed with any governmental entity or furnished to employees,
former employees or beneficiaries (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA, but excluding individual account statements and tax forms) have been
delivered to Purchaser. There are no negotiations, demands or proposals which
are pending or have been made which concern matters now covered, or that would
be covered, by the type of agreements required to be listed in Schedule 2.13(b).
(o) All expenses and liabilities relating to all of the Plans have been,
and will on the Closing Date be fully and properly accrued on Company's books
and records and disclosed in accordance with GAAP and in Plan financial
statements.
2.14 Certain Agreements Affected by the Merger. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including, without limitation,
any severance, unemployment compensation, golden parachute or bonus payment)
becoming due to any director, officer, agent or employee of Company or any of
its subsidiaries or any other third party, (ii) materially increase any benefits
otherwise payable by Company or any of its subsidiaries to their respective
employees or (iii) result in the acceleration of the time of payment or vesting
of any such benefits.
2.15 Employee Matters.
(a) Company and each of its subsidiaries are in compliance in all
material respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and
are not engaged in any unfair labor practice, except where the failure to be in
compliance or the engagement in unfair labor practices has not had and would not
be reasonably expected to have a Company Material Adverse Effect. Company and
each of its subsidiaries have in all material respects withheld all amounts
required by law or by agreement to be withheld from the wages, salaries, and
other payments to their respective employees; and are not liable for any arrears
of wages or any taxes or any penalty for failure to comply with any of the
foregoing.
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(b) To Company's knowledge, neither Company nor any of its subsidiaries
is liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending claims against Company or any of its
subsidiaries under any workers' compensation plan or policy or for long term
disability that are not covered by insurance. Neither Company or any of its
subsidiaries has any obligations under COBRA with respect to any former
employees or qualifying beneficiaries thereunder, except obligations that would
not have a Material Adverse Effect on Company. There are no controversies
pending or, to the knowledge of Company or any of its subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to result in
an action, suit, proceeding, claim, arbitration or investigation against Company
before any agency, court or tribunal, foreign or domestic except for such
action, suit, proceeding, claim, arbitration or investigation that would not
have a Material Adverse Effect on Company. Neither Company nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
union contract, nor does Company or any of its subsidiaries know of any
activities or proceedings of any labor union or organization of any such
employees.
(c) To Company's or any of its subsidiaries' knowledge, no employees of
Company or its subsidiaries are in violation of any term of any employment
contract, patent disclosure agreement, enforceable noncompetition agreement, or
any enforceable restrictive covenant to a former employer relating to the right
of any such employee to be employed by Company or any of its subsidiaries
because of the nature of the business conducted or presently proposed to be
conducted by Company or its subsidiaries or to the use of trade secrets or
proprietary information of others. No employees which are considered key to the
operations or the business of Company or any of its subsidiaries have given
notice to Company or its subsidiaries, nor is Company or any of its subsidiaries
otherwise aware that any such employee intends to terminate his or her
employment with Company or its subsidiaries.
2.16 Insurance. Company and each of its subsidiaries have made available
to Parent all material policies of insurance. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Company and
its subsidiaries are otherwise in compliance with the terms of such policies and
bonds. Neither Company nor any of its subsidiaries has knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
2.17 Compliance With Laws. Each of Company and its subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Company Material Adverse Effect.
2.18 Brokers' and Finders' Fees. Except for Banc of America Securities,
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement, the
Merger or any other transaction contemplated hereby. Company has furnished or
made available to Parent accurate and complete copies of all agreements under
which any such finders' fees or agents' commissions or investment bankers' fees
or any similar charges have been paid or may become payable to, and all
indemnification and other agreements related to the engagement of Banc of
America Securities.
2.19 Affiliates Agreements; Stockholder Voting Agreements; Irrevocable
Proxies. Each Person and/or entity deemed to be an "affiliate" within the
meaning of Rule 145 and as defined in Rule 501 promulgated under the Securities
Act (an "Affiliate") of Company will have executed within fifteen (15) days of
the Execution Date, an Affiliates Agreement substantially in the form attached
hereto as Exhibit B-1 ("Company Affiliates Agreement"); and certain directors
and officers of Company have agreed in writing to vote for approval of the
Merger and this Agreement pursuant to a Stockholder Voting
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Agreement substantially in the form attached hereto as Exhibit C ("Stockholder
Voting Agreement"), and pursuant to Irrevocable Proxies attached thereto as
Attachment A ("Irrevocable Proxies").
2.20 Vote Required. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date set for the
Company Stockholders Meeting is the only vote of the holders of any of Company's
Capital Stock necessary to approve this Agreement and the transactions
contemplated thereby and hereby.
2.21 Board Approval. The Board of Directors of Company has (i) approved
this Agreement and the Merger, (ii) determined that the Merger is in the best
interests of the stockholders of Company and is on terms that are fair to such
stockholders, and (iii) recommended that the stockholders of Company approve
this Agreement and the Merger.
2.22 Customers and Suppliers. Schedule 2.22 lists the top 10 customers of
Company in terms of gross revenues during the twelve (12) months prior to the
Execution Date; and no such customer and no supplier of Company or any of its
subsidiaries has canceled or otherwise terminated or made any written threat to
Company or any of its subsidiaries to cancel or otherwise terminate its
relationship with Company or any of its subsidiaries, or at any time on or after
the Company Balance Sheet Date has decreased materially its services or supplies
to Company or any of its subsidiaries in the case of any such supplier, or its
usage of the services or products of Company in the case of such customer, and
to Company's or any of its subsidiaries knowledge, no such supplier or customer
intends to cancel or otherwise terminate its relationship with Company or any of
its subsidiaries or to decrease materially its services or supplies to Company
or any of its subsidiaries or its usage of the services or products of Company
or any of its subsidiaries, as the case may be. Neither Company or any of its
subsidiaries has knowingly breached, so as to provide a benefit to Company or
any of it subsidiaries that was not intended by the parties, any agreement with,
or engaged in any fraudulent conduct with respect to, any customer or supplier
of Company or any of its subsidiaries.
2.23 Material Contracts. Except (i) as set forth in the Company SEC
Documents filed prior to the date of this Agreement; (ii) as set forth in
Schedule 2.10; (iii) as set forth in this Schedule 2.23 (the contracts in (i),
(ii), and (iii) being collectively referred to herein as the "Material
Contracts"); and (iv) for this Agreement, and other contracts and agreements
which individually or in the aggregate are not material to Company's or any of
its subsidiaries' businesses, as of the date of this Agreement, Company is not a
party to or bound by:
(a) any distributor, sales, agency or manufacturer's representative,
consulting, joint-venture, or partnership contract or joint R&D or technology
sharing arrangements;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$200,000 over the life of the contract;
(c) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(d) any contract for capital expenditures in excess of $200,000 in the
aggregate;
(e) any contract limiting the freedom of Company to engage in any line
of business, to acquire any product or asset from any other Person, to sell any
product or asset to, or to perform any service for, any Person, or to compete
with any other Person (as that term is defined in the Exchange Act);
(f) any confidentiality, secrecy or non-disclosure contract, which
individually or in the aggregate, materially affects or could be reasonably
anticipated to materially affect the business or operations of Company;
(g) any contract pursuant to which Company is a lessor of real property
or any machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property involving in the case of any such personal property contact
more than $200,000 over the life of the contract;
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(h) any contract with any Person with whom Company does not deal at
arm's length;
(i) any contract which provides for the indemnification of any officer,
director, employee or agent; or
(j) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
2.24 No Breach of Material Contracts. All Material Contracts are in the
written form previously provided or made available to Parent. Company has
performed all of the material obligations required to be performed by it as of
the date hereof and is entitled to all benefits under, and, to Company's
knowledge, is not alleged to be in material breach or default in respect of any
Material Contract. To Company's knowledge, each of the Material Contracts is in
full force and effect, unamended except as provided or made available to Parent,
and there exists no default or event of default or event, occurrence, condition
or act, with respect to Company or, to Company's knowledge, with respect to the
other contracting party, which, with the giving of notice, the lapse of the time
or the happening of any other event or conditions, would become a default or
event of default under any Material Contract or would give any Person the right
to exercise any remedy, or the right to any rebate, chargeback, penalty or
change in delivery schedule, except to the extent such defaults, remedies,
penalties or changes have not had and would not be reasonably expected to have a
Material Adverse Effect on Company.
2.25 Material Third Party Consents. Schedule 2.25 lists all contracts that
require a novation or consent to the Merger or change of control, as the case
may be, prior to the Effective Time so that such contracts may remain in full
force and effect after the Closing (the "Contracts Requiring Novation or Consent
to Change of Control")which, if no novation occurs or if no consent to the
Merger or change of control is obtained, would have a Material Adverse Effect on
Parent's ability to operate the business in the same manner as the business was
operated by Company prior to the Effective Time.
2.26 Real Property.
(a) Neither Company nor any of its subsidiaries currently owns or has
ever owned any real property.
(b) To the extent not disclosed in the Company SEC Documents, Schedule
2.26 sets forth a list of all leases, licenses or similar agreements to which
Company or any of its subsidiaries is a party, that are for the use or occupancy
of real estate owned by a third party ("Leases") (copies of which have
previously been furnished to Parent), in each case, setting forth: (i) the
lessor and lessee thereof and the commencement date, term and renewal rights
under each of the Leases, and (ii) the street address or legal description of
each property covered thereby (the "Leased Premises"). The Leases are in full
force and effect in all material respects, to the knowledge of Company, and have
not been amended except as disclosed in the Company SEC Documents or Schedule
2.26 and, Company is not, and, to the knowledge of Company, no other party
thereto, is in default or breach under any such Lease and no event has occurred
by Company that, with the passage of time or the giving of notice or both, would
cause a breach of or default of Company under any of such Leases, except to the
extent such default would not have a Material Adverse Effect on Company. Either
Company or its subsidiaries have valid leasehold interests in each of the Leased
Premises, which leasehold interest is free and clear of any liens, covenants and
easements or title defects of any nature whatsoever other than Permitted Liens.
(c) With respect to the Leased Premises, (i) there are no pending or, to
the knowledge of Company, threatened condemnation proceedings, suits or
administrative actions relating to any such parcel or other matters affecting
adversely the current use, occupancy or value thereof, (ii) to the Company's
knowledge, all improvements, buildings and systems on any such parcel are in
good repair and safe for their current occupancy and use, (iii) to the knowledge
of Company, there are no contracts or agreements (whether oral or written)
granting to any party or parties the right of use or occupancy of any such
parcel, and there are no parties (other than Company) in possession of any such
parcel, (iv) to the knowledge of Company, there are no outstanding options or
rights of first refusal or similar rights to purchase any such
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parcel or any portion thereof or interest therein, (v) to the knowledge of
Company, all facilities located on each such parcel are supplied with utilities
and other services necessary for their ownership, operation or use, currently or
as currently proposed by Company, all of which services are adequate in
accordance with all applicable laws, ordinances, rules and regulations, and (vi)
to the Company's knowledge, each such parcel abuts on and has adequate direct
vehicular access to a public road and there is no pending or, to the knowledge
of Company, threatened termination of such access.
2.27 Registration Statement; Proxy Statement/Proxy. The information
relating to Company which is provided by Company (including any information
previously provided by Company in the Company SEC Documents) for inclusion in
the registration statement on Form S-4 (or such other successor form as may be
appropriate) pursuant to which the shares of Parent Common Stock to be issued in
the Merger will be registered with the SEC, including any amendments or
supplements thereto (the "Registration Statement") shall not, at the time the
Registration Statement is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
relating to Company which is provided by Company (including any information
previously provided by Company in the Company SEC Documents) for inclusion in
the proxy statement/prospectus to be set to the stockholders of Company in
connection with the meeting of the Company stockholders (the "Company
Stockholders Meeting"), as may be amended or supplemented (the "Proxy
Statement") shall not, on the date the Proxy Statement is first mailed to the
stockholders of Company, at the time of the Company Stockholders Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; or omit to state a material fact necessary to correct any
statement in an earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
misleading. Notwithstanding the foregoing, Company makes no representation,
warranty or covenant with respect to any information supplied by Parent and
relating to Parent which is contained in the Registration Statement or the Proxy
Statement.
2.28 Tax Matters. To Company's knowledge neither Company nor any of its
Affiliates has taken or agreed to take any action, nor does Company have
knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.29 Opinion of Financial Advisor. Company has been advised in writing by
its financial advisor, Banc of America Securities, that in such advisor's
opinion, as of the date hereof, the consideration to be received by the
stockholders of Company is fair from a financial point of view, to the
stockholders of Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
In this Agreement, any reference to a "Parent Material Adverse Effect" any
change, event or effect that is materially adverse to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of Parent and its subsidiaries,
taken as a whole; provided, however, that none of the following shall be deemed
in themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Parent Material Adverse Effect: (a) any change in the market price or
trading volume of Parent's stock after the date hereof; (b) any adverse change,
effect, event, occurrence, state of facts or development to the extent
attributable to the announcement or pendency of the Merger (including any
cancellation of or delays in customer orders, any reduction in sales, any
disruption in supplier, distributor, partner or similar relationships or any
loss of employees); (c) any adverse change, effect, event, occurrence, state of
facts or development attributable to conditions affecting the industries as a
whole in which Parent participates, the U.S. economy as a whole or the foreign
economies as a whole in any locations where Parent or any of its subsidiaries
has material operations or sales; or (d) any adverse
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change, effect, event, occurrence, state of facts or development arising from or
relating to compliance with the terms of, or the taking of any action required
by, this Agreement.
Except as disclosed in a document of even date herewith and delivered by
Parent to Company prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Parent
Disclosure Schedule"), provided that any disclosure shall qualify the section
number referred to in the Parent Disclosure Schedule as well as all other
sections in this Article III when it is reasonably apparent from a reading of
such disclosure that it also qualifies or applies to such other sections,
provided further that Parent shall make all reasonable efforts to specifically
cross reference in the Parent Disclosure Schedule all sections where a
particular disclosure qualifies or applies, Parent represents and warrants to
Company as follows:
3.1 Organization, Standing and Power. Parent and each of its subsidiaries,
including Merger Sub, are corporations duly organized, validly existing and in
good standing under the laws of their respective jurisdictions of organization.
Each of Parent and its subsidiaries, including Merger Sub, have the corporate
power to own their respective properties and to carry on their respective
businesses as now being conducted and as proposed to be conducted and are each
duly qualified to do business and are in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a Parent
Material Adverse Effect. Neither Parent nor any of its subsidiaries, including
Merger Sub, is in violation of any of the provisions of its respective Articles
of Incorporation or Bylaws or equivalent organizational documents. Parent is the
owner of all outstanding shares of capital stock of each of its subsidiaries and
all such shares are duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in the Parent SEC Documents (as defined in
Section 3.4 hereof), Parent does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by Parent or any of it subsidiaries
in accordance with and pursuant to the Parent's formal investment policy and
comprising less than 5% of the outstanding stock of such company.
3.2 Capital Structure.
(a) The authorized capital stock of Parent consists of (i) 240,000,000
shares of Common Stock, no par value, of which there were 131,293,460 shares
issued and outstanding as of the close of business on the day two days prior to
the Execution Date, and (ii) 10,000,000 shares of Preferred Stock, no par value,
of which there were no shares issued and outstanding as of the close of business
on the day two days prior to the Execution Date. There are no other outstanding
shares of capital stock or voting securities and no outstanding commitments to
issue any shares of capital stock or voting securities, other than pursuant to
the exercise of options outstanding as of such date under the Parent 1992 Stock
Option Plan (the "Parent Stock Option Plan"), and the Parent 1992 Employee Stock
Purchase Plan (the "Parent ESPP"). The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, $0.001 par value, all of which are
issued and outstanding and held by Parent. The shares of Parent Common Stock to
be issued in the Merger will be duly authorized, validly issued, fully paid and
nonassessable and registered with the SEC pursuant to the Securities Act.
(b) All outstanding shares of Parent Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances, other than any liens or encumbrances created by or imposed upon
the holders thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws of Parent or
any agreement to which Parent is a party or by which it is bound. As of the
close of business on September 30, 2000, Parent has reserved (i) 33,345,000
shares of Common Stock for issuance to directors, employees and consultants
pursuant to the Parent 1992 Stock Option Plan, of which 12,621,201 shares have
been issued pursuant to option exercises or direct stock purchases, 13,450,269
shares are subject to outstanding, unexercised options, and 7,273,530 shares are
available for issuance thereunder (iii) 3,900,000 shares of Common Stock under
the Parent ESPP, of which 2,963,871 shares have been issued. On the Execution
Date, except as set forth in the Parent SEC Documents and except for (i) the
rights created pursuant to this
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Agreement, the Parent Stock Option Plan, and the Parent ESPP and (ii) Parent's
right to repurchase any unvested shares under the Parent Stock Option Plan,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Parent is a party or by which it is bound obligating
Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of Parent Capital Stock or
obligating Parent to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement.
3.3 Authority.
(a) Parent and Merger Sub each have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Merger Sub,
as applicable.
(b) This Agreement has been duly executed and delivered by each of
Parent and Merger Sub, as applicable, and each constitutes the valid and binding
obligations of Parent and Merger Sub enforceable against each by Company in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally and by general principles of
equity. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under (i)
any provision of the Articles of Incorporation or Bylaws of Parent or Merger
Sub, as amended, or (ii) any material mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent,
Merger Sub or their respective properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions in subsection (ii) would not have had and would not be
reasonably expected to have a Parent Material Adverse Effect.
(c) Except as otherwise would not have a Parent Material Adverse Effect,
no consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required with respect to Parent or
Merger Sub in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby and thereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 1.2, (ii) the filing of a Form 8-K with the SEC and the NASD
within fifteen (15) days after the Closing Date, (iii) the filing with the SEC
and the NASD of the Registration Statement, (iv) any filings as may be required
under applicable federal, state and local securities laws and the securities
laws of any foreign country, (v) such filings as may be required under HSR, (vi)
the filing with the NASDAQ Stock Market of a Notification Form for Listing of
Additional Shares with respect to the shares of Parent Common Stock issuable
upon conversion of the Company Common Stock in the Merger and upon exercise of
the options under the Company Stock Option Plans and assumed by Parent, (vii)
the filing of a registration statement on Form S-8 with the SEC, or other
applicable form covering the shares of Parent Common Stock issuable pursuant to
outstanding options under the Company Stock Option Plans and assumed by Parent,
(viii) the filing of a Form S-4 Registration Statement with the SEC in
accordance with the Securities Act; and (ix) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Parent has made available to
Company each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filing filed with the SEC by Parent since January 1, 1997
(collectively, the "Parent SEC Documents"). In addition, Parent has made
available to Company all exhibits to the Parent SEC Documents filed prior to the
date hereof, and will promptly make available to
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Company all exhibits to any additional Parent SEC Documents filed prior to the
Effective Time. As of their respective filing dates, the Parent SEC Documents
complied in all material respects with the requirements of the Exchange Act and
the Securities Act. The financial statements of Parent, including the notes
thereto, included in the Parent SEC Documents (the "Parent Financial
Statements") were complete and correct in all material respects as of their
respective dates, complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements, included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Parent
Financial Statements fairly present the consolidated financial condition and
operating results of Parent as of the dates and for the periods indicated
therein (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments).
3.5 Tax Matters. To Parent's knowledge neither Parent nor any of its
Affiliates has taken or agreed to take any action, nor does Parent have
knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.6 Absence of Undisclosed Liabilities. Parent has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the balance sheet or in
the notes to the Parent Financial Statements included in the Parent Financial
Statements in Parent's Quarterly Report on Form 10-Q for the period ended on
June 30, 2000 (the "Parent Balance Sheet Date"), (ii) those incurred in the
ordinary course of business since the Parent Balance Sheet Date and consistent
with past practice, (iii) those incurred in connection with the execution of
this Agreement, and (iv) those disclosed on Schedule 3.6.
3.7 Litigation. Except as set forth in the Parent SEC Documents, as of the
date of this Agreement, there is no material private or governmental action,
suit, proceeding, claim, arbitration, governmental investigation, or to the
knowledge of Parent private investigation, pending before any agency, court or
tribunal, foreign or domestic, or, to the knowledge of Parent or any of its
subsidiaries, threatened against Parent, any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such). There is no judgment, decree or order against Parent or any
of its subsidiaries, or, to the knowledge of Parent, or any of its subsidiaries,
or any of their respective directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Parent Material Adverse Effect. Schedule 3.7 of the Parent Disclosure Schedule
also lists all material litigation that Parent has pending as of the date of
this Agreement against other parties which is not disclosed in the Parent SEC
Documents.
3.8 Board and Shareholder Approval. The Board of Directors of Parent has
(i) approved this Agreement and the Merger, and (ii) determined that the Merger
is in the best interests of the shareholders of Parent and is on terms that are
fair to such shareholders. No action is necessary on the part of the
shareholders of Parent in connection with this Agreement or the Merger.
3.9 Registration Statement; Proxy Statement/Proxy. The information
relating to Parent which is provided by Parent (including any information
previously provided by Parent in the Parent SEC Documents) for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective by the SEC and at all times subsequent thereto (through and
including the Effective Date), contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information relating to Parent which is
provided by Parent (including any information previously provided by Parent in
the Parent SEC Documents) for inclusion in the Proxy Statement shall not, on the
date the Proxy Statement is first mailed to the stockholders of Company, at the
time of the Company Stockholders Meeting and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or
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necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; or omit to state a material fact
necessary to correct any statement in an earlier communication with respect to
the solicitation of proxies for the Company Stockholders Meeting which has
become false or misleading. Notwithstanding the foregoing, Parent makes no
representation, warranty or covenant with respect to any information supplied by
Company or relating to Company which is contained in the Registration Statement
or the Proxy Statement.
3.10 Opinion of Financial Advisor. Parent has been advised in writing by
its financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, that
in such advisor's opinion, as of the date hereof, the Exchange Ratio is fair
from a financial point of view, to Parent.
3.11 Investigation by Parent; Company's Liability. Parent has conducted
its own independent investigation, review and analysis of the business,
operations, assets, liabilities, results of operations, financial condition,
software, technology and prospects of the Company, which investigation, review
and analysis was done by Parent and its Affiliates and, to the extent Parent
deemed appropriate, by Parent's representatives. Parent acknowledges that it and
its representatives have been provided adequate access to the personnel,
properties, premises and records of the Company and the Company Subsidiaries as
Parent has requested for such purpose. In entering into this Agreement, Parent
acknowledges that it has relied solely upon the aforementioned investigation,
review and analysis and not on any factual representations or opinions of
Company's or any of Company's representatives (except the specific
representations and warranties of Company set forth in this Agreement and the
Company Disclosure Schedules). Parent has formed an independent judgment
concerning the Company.
3.12 Absence of Certain Changes. Except as set forth in the Parent SEC
Documents prior to the date hereof or as expressly contemplated by this
Agreement, since the Parent Balance Sheet Date there has not occurred any
change, event or condition (whether or not covered by insurance or similar
indemnification agreement) that has resulted in, or would reasonably be expected
to result in, a Parent Material Adverse Effect.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent expressly
contemplated by this Agreement, Section 4.2 hereof or as consented to in writing
by Parent), to carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted. Subject to Section 4.2
hereof, Company further agrees to pay all debts and Taxes when due, subject (i)
to good faith disputes over such debts or Taxes and (ii) and the filing of
material Tax Returns (provided that Company shall inform Parent of its intention
to file such Tax Returns prior to filing), to pay or perform other obligations
when due, and to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organizations, to keep
available the services of its present officers and key employees and to preserve
its relationships with customers, suppliers, distributors, licensors, licensees
and others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time, other than what
would not have a Material Adverse Effect on Company. Company agrees to promptly
notify Parent of any event or occurrence not in the ordinary course of its
business, and of any event which could reasonably be expected to have a Company
Material Adverse Effect.
4.2 Restriction on Conduct of Business of Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as set forth in the Company
Disclosure Schedule or as expressly contemplated by this Agreement, Company
shall not do, cause or permit any of the following, without the prior written
consent of Parent:
(a) Charter Documents. Cause or permit any amendments to its Certificate
of Incorporation or Bylaws;
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(b) Dividends; Changes in Capital Stock. Declare or pay any dividends on
or make any other distributions (whether in cash, stock or property) in respect
of any of its capital stock; or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it;
(c) Stock Option Plans. Accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans;
(d) Material Contracts. Enter into any material contract or commitment,
or violate, amend or otherwise modify or waive any of the terms of any of its
material contracts other than in the ordinary course of business; provided,
further, that other than in the ordinary course of business, Company shall not
enter into any contract, commitment or agreement (i) which grants any third
party exclusive rights, (ii) which provides any third party with equity, as
compensation or otherwise, or (iii) with any third party which could reasonably
be deemed to be a competitor of Parent;
(e) Issuance of Securities. Except with respect to the transfer of
Company securities contemplated by this Agreement, issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of Company Common
Stock pursuant to (i) the exercise of Company Options issued and outstanding on
the date hereof, (ii) other rights therefor outstanding as of the date of this
Agreement; (iii) the issuance of no more than 200,000 additional stock options
in accordance with Parent guidelines for the issuance of the same for such level
of employee, a copy of which has been provided to Company by Parent; and (iv)
pursuant to the Company ESPP pursuant to Section 5.11(b) hereof.
(f) Intellectual Property. Transfer to any Person or entity any of its
Intellectual Property or any rights to its Intellectual Property other than in
the ordinary course of business consistent with past practice; provided that
Company will promptly disclose any such transfer to Parent;
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its business, taken as a whole except for sales of products in
the ordinary course;
(i) Indebtedness. Incur any indebtedness for borrowed money under
existing credit lines or otherwise, except as reasonably necessary for the
operation of its business in a manner, and in amounts, consistent with past
practices, or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(j) Leases. Enter into any material operating lease;
(k) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $100,000 in any one case or $500,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, and other
than the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financial Statements;
(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice, and not withstanding the above, make any such
expenditures, additions or improvements in excess of $250,000 in any one case;
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(m) Other Expenses. Except in the ordinary course of business, commit to
or incur any other expenses (excluding discharge of indebtedness which is
addresses in (k) above and capital expenditures which are addressed in (l)
above) in an amount in excess of $250,000 in any one case, and except for
payment of legal, accounting and banking fees in connection with this Agreement
and the transactions contemplated hereunder in the amounts set forth in Section
6.3(e);
(n) Insurance. Materially reduce the amount of any insurance coverage
provided by existing insurance policies;
(o) Termination or Waiver. Terminate or waive any right of any material
or substantial value, except in the ordinary course of business;
(p) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend any
employee benefit or stock purchase or option plan, except as required under
ERISA or except as necessary to maintain the qualified status of such plan under
the Code, or hire any new director level or officer level employee, or increase
the annual level of compensation of any employee, or grant any unusual or
extraordinary bonuses, benefits or other forms of direct or indirect
compensation to any employee, officer, director or consultant, except in the
ordinary course of business and in amounts consistent with past practices;
(q) Severance Arrangements. Grant any severance or termination pay (i)
to any director or officer or (ii) to any other employee, except payments made
pursuant to written agreements outstanding on the date hereof;
(r) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) for a breach of this Agreement or any Exhibits
hereto;
(s) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its business, taken as a whole;
(t) Taxes. Other than in the ordinary course of business, or as required
by GAAP, make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Tax Return
or any amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes;
(u) Revaluation. Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(v) Pooling. Take any action which would reasonably be known after
consultation with Company's financial and accounting advisors to interfere with
Parent's ability to account for the Merger as a "pooling of interests"; or
(w) Other. Take or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (v) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect in any material respect or prevent it from performing or
cause it not to perform its covenants hereunder.
4.3 No Solicitation.
(a) Company and its subsidiaries and the officers, directors, employees
or other agents of Company and its subsidiaries will not, directly or
indirectly, (i) take any action to solicit, initiate or intentionally encourage
any Takeover Proposal (defined below) or (ii) subject to the terms of Section
4.3(b) below, take any action to solicit, intentionally facilitate,
intentionally encourage or engage in negotiations or discussions with, or
disclose any nonpublic information relating to Company or any of it subsidiaries
to, or afford access to the properties, books or records of Company or any of
its subsidiaries to,
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any Person that has advised Company in writing that it intends to make, or that
has made, a Takeover Proposal; provided, nothing herein shall prohibit Company's
Board of Directors from complying with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer.
(b) Notwithstanding Section 4.3(a) above, if an unsolicited written
Takeover Proposal, or an unsolicited written expression of interest that can
reasonably be expected to lead to a Takeover Proposal, shall be received by the
Board of Directors of Company, then (i) if none of Company, its subsidiaries,
and their respective officers, directors, employees or other agents and
representatives have violated any of the restrictions in this Section 4.3(a),
and (ii) to the extent the Board of Directors of Company believes in good faith
(after consultation with its financial advisors) that such Takeover Proposal
would, if consummated, result in a transaction more favorable to Company's
stockholders than the transaction contemplated by this Agreement (any such more
favorable Takeover Proposal being referred to in this Agreement as a "Superior
Proposal"), and (iii) the Board of Directors of Company determines in good faith
(after consultation with outside legal counsel) that failure to take action with
respect to such Superior Proposal would be inconsistent with the fiduciary
duties of the Board of Directors of Company to Company stockholders under
applicable law, Company and its officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants and other representatives
retained by it may furnish in connection with such a Superior Proposal
information and take such other actions with respect to such Superior Proposal
as are consistent with the fiduciary obligations of Company's Board of
Directors, and such actions with respect to such Superior Proposal shall not be
considered a breach of Section 4.3(a), provided that in each such event Company
(A) notifies Parent in writing of such determination by the Company Board of
Directors, (B) provides Parent with a summary of the Superior Proposal received
from such third party so long as such disclosure does not cause the breach of
any non-disclosure or confidentiality agreements of Company outstanding as of
the Execution Date, and (C) informs Parent of all documents containing or
referring to non-public information of Company that are supplied to such third
party so long as such disclosure does not cause the breach of any non-disclosure
or confidentiality agreements of Company outstanding as of the Execution Date.
Notwithstanding the immediately preceding sentence, neither Company nor its
representatives may take any action with respect to a Superior Proposal unless
(x) the Board of Directors of Company has determined, with the advice of
Company's investment bankers, that such third party is actually capable of
making a Superior Proposal upon satisfactory completion of such third party's
review of the information supplied by Company, (y) the third party has stated
that it intends to make a Superior Proposal, and (z) Company provides such
non-public information to such third party pursuant to a non-disclosure or
confidentiality agreement at least as restrictive as the Confidentiality
Agreement (as defined in Section 5.4). Additionally Company shall not, and shall
not permit any of its officers, directors, employees or other representatives to
agree to or intentionally endorse any Takeover Proposal (including any Superior
Proposal) unless Parent or Company shall have terminated this Agreement and
Company shall have paid to Parent all amounts payable to Parent pursuant to
Section 7.3(b).
(c) Company will promptly notify Parent after receipt, but in no event
later than 24 hours from such receipt, of any Takeover Proposal or any notice
that any Person is considering making a Takeover Proposal or any request for
non-public information relating to Company or any of its subsidiaries or for
access to the properties, books or records of Company or any of its subsidiaries
by any Person that has advised Company that it may be considering making, or
that has made, a Takeover Proposal and will keep Parent fully informed of the
status of any such Takeover Proposal notice or request and shall provide Parent
with a true summary of such Takeover Proposal notice or request.
(d) For purposes of this Agreement, "Takeover Proposal" means any offer
or proposal for, or any indication of interest in (whether written or oral), a
merger or other business combination involving Company or any of its
subsidiaries or the acquisition of any significant equity interest (30%) in, or
a significant portion of the assets (30% or more on a consolidated basis) of,
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement. Promptly after the
execution of this Agreement, Company and Parent shall prepare, and Parent shall
file with the SEC a Registration Statement on Form S-4 (or such other form or
successor form as shall be appropriate), which complies in form with applicable
SEC requirements and shall use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable; provided,
however, that Parent shall have no obligation to agree to account for the Merger
as a "purchase" in order to cause the Registration Statement to become
effective. If, at any time prior to the Effective Time, any event or information
should be discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Company shall
promptly inform Parent. Subject to the provisions of Section 4.3, the Proxy
Statement shall include the recommendation of the Board of Directors of Company
that the Company stockholders vote in favor of the Merger and approve this
Agreement; provided that such recommendation may not be included or may be
withdrawn if previously included if (i) none of Company, its subsidiaries and
their respective officers, directors, employees or other agents and
representatives violated any of the restrictions in Section 4.3(a) hereof, (ii)
Company's Board of Directors believes in good faith that a Superior Proposal has
been made, and (iii) following consultation with outside legal counsel,
Company's Board of Directors determines that the inclusion of such
recommendation or the failure to withdraw such recommendation would be
inconsistent with the fiduciary duties of the Board of Directors of Company to
the stockholders of Company under applicable laws.
5.2 Meeting of Stockholders. Company shall promptly after the date hereof
take all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to call, give notice of, convene and hold the Company
Stockholders Meeting, as promptly as practicable, and in any event within
forty-five (45) days of the Registration Statement being declared effective by
the SEC. Company shall give Parent no less than ten (10) business days advance
notice of the date which shall be set as the "record date" for the Company
Stockholders eligible to vote on this Agreement and the Merger. Company shall
also consult with Parent regarding the date of the Company Stockholders Meeting
and shall not postpone or adjourn (other than for the absence of a quorum) the
Company Stockholders Meeting without the consent of Parent unless this Agreement
is first terminated by Company pursuant to Article VII hereof. Subject to
Sections 4.3 and 5.1, Company shall use commercially reasonable efforts to
solicit from stockholders of Company proxies in favor of the Merger and shall
take all other action necessary or advisable to secure the vote or consent of
stockholders required by the rules of Nasdaq or the laws of Delaware or other
applicable law to effect the Merger.
5.3 Access to Information; Disclosure Schedule Updates.
(a) Upon reasonable notice, Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time or the earlier
termination of this Agreement in accordance with its terms, provided that such
access does not cause disruption to the day-to-day operation of Company and
provided further that Parent contacts Company's Chief Financial Officer prior to
contacting any other employee of Company, to (i) all of Company's properties,
books, contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of Company as Parent may
reasonably request. Company agrees to provide to Parent and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof
until the Effective Time or the earlier termination of this Agreement in
accordance with its terms, Company and Parent shall confer on a regular and
frequent basis to report operational matters of materiality and the general
status of ongoing operations of Company.
(c) No information or knowledge obtained in any investigation after the
Execution Date pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained
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herein or the conditions to the obligations of the parties to consummate the
Merger; provided, however that Company shall promptly inform Parent of any such
information or knowledge obtained in its investigation which would reasonably be
likely to have a Company Material Adverse Effect. Additionally, during the
period from the date hereof and prior to the Effective Time or the earlier
termination of this Agreement in accordance with its terms, Company shall
promptly notify Parent in writing of:
(i) the discovery of any event, condition, fact or circumstance which
causes, caused, constitutes or constituted a breach of any representation or
warranty made by Company in this Agreement or any other agreement contemplated
hereby to the extent that such event, condition, fact or circumstance would
cause the condition in Section 6.3(a) of this Agreement not to be satisfied;
(ii) any material breach of any covenant or obligation by Company;
and
(iii) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the covenants or conditions set forth in this
Article V or Article VI impossible or unlikely.
(d) If any event, condition, fact or circumstances that is required to
be disclosed pursuant to Section 5.3(c) requires any material change in
Company's Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming Company's Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstances, then Company shall promptly deliver to
Parent an update to its Disclosure Schedule specifying such change (a
"Disclosure Schedule Update"). Notwithstanding anything therein to the contrary,
no such update shall be deemed to supplement or amend Company's Disclosure
Schedule for the purpose of (A) determining the accuracy of any of the
representations and warranties made by such party in this Agreement, or (B)
determining whether any of the conditions set forth in Article VI has been
satisfied.
(e) Company shall provide Parent and its accountants, counsel and other
representatives reasonable access, during normal business hours during the
period prior to the Effective Time, to all of Company's Tax Returns and other
records and workpapers relating to Taxes, provided that such access does not
cause disruption to the day-to-day operation of Company and provided further
that Parent contacts Company's Chief Financial Officer prior to contacting any
other employee of Company, and shall provide to Parent and its representatives
the following information promptly upon the request of Parent: (i) the types of
Tax Returns being filed by Company in each taxing jurisdiction, (ii) the year of
the commencement of the filing of each such type of Tax Return, (iii) all closed
years with respect to each such type of Tax Return filed in each jurisdiction,
(iv) all material Tax elections filed in each jurisdiction by Company, (v) any
deferred intercompany gain with respect to transactions to which Company has
been a party, and (vi) receipts for any Taxes paid to foreign Tax authorities.
5.4 Confidentiality. The parties acknowledge that Parent and Company have
previously executed a (i) Confidentiality Agreement dated October 20, 2000 (the
"Confidentiality Agreement"), a copy of which is attached hereto as Exhibit D,
which Confidentiality Agreement shall continue in full force and effect in
accordance with its terms.
5.5 Public Disclosure. Company and Parent shall consult with each other
before issuing any press releases or otherwise make any public statements or
make any other public (or non-confidential) disclosures (whether or not in
response to an inquiry) regarding the terms of this Agreement and the
transactions contemplated hereby, and neither shall issue a press release or
make any statements or disclosures without the prior written approval of the
other (which consent shall not be unreasonably withheld), except as may be
required by law or by obligations pursuant to any listing agreement with any
national securities exchange or with the NASD.
5.6 Consents; Cooperation.
(a) Each of Parent and Company shall promptly apply for or otherwise
seek, and use commercially reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR. Company and Parent shall each use
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their respective best efforts to obtain all necessary consents, waivers and
approvals under any of their respective material contracts in connection with
the Merger for the assignment thereof or otherwise. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
HSR or any other federal or state antitrust or fair trade law.
(b) Each of Parent and Company shall use all commercially reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and Company shall cooperate and use all commercially reasonable efforts
vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each an "Order"), that
is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any such other transactions, unless by mutual agreement Parent and
Company decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither party shall have any obligation to
litigate or contest any administrative or judicial action or proceeding or any
Order beyond the date of a ruling preliminarily enjoining the Merger issued by a
court of competent jurisdiction. Each of Parent and Company shall use all
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Notwithstanding anything to the contrary in Section 5.6(a) or (b),
(i) Parent shall not be required to divest any of its or its subsidiaries'
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation where such divestiture or other action could
reasonably be expected to have a Material Adverse Effect on Parent or of the
Surviving Corporation after the Effective Time, and (ii) Company and its
subsidiaries shall not be required to divest any of their respective businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation where such divestiture or other action could reasonably be
expected to have a Material Adverse Effect on Company.
(d) Company shall use commercially reasonable efforts to furnish Parent,
on or prior to the Closing Date, with evidence satisfactory to it of the consent
or approval of those Persons whose consent or approval shall be required in
connection with the Merger under the contracts of Company set forth, or required
to be set forth, on Schedule 2.25.
5.7 Affiliates Agreements.
(a) Schedule 5.7(a) sets forth those persons who may be deemed
Affiliates of Company. Company shall provide Parent with such information and
documents as Parent shall reasonably request for purposes of reviewing such
list. Company shall use its commercially reasonable efforts to deliver no later
than fifteen (15) days after the Execution Date from each of the Affiliates of
Company, a Company Affiliates Agreement in the form attached hereto as Exhibit
B-1. Parent and Merger Sub shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement and to issue appropriate
stock transfer instructions to the transfer agent for Parent Common Stock.
(b) Schedule 5.7(b) sets forth those persons who may be deemed
Affiliates of Parent. Parent shall provide Company such information and
documents as Company shall reasonably request for purposes of reviewing such
list. Parent shall use its commercially reasonable efforts to deliver no later
than fifteen
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(15) days after the Execution Date from each of the Affiliates of Parent, a
Parent Affiliates Agreement in the form attached hereto as Exhibit B-2.
5.8 Stockholder Voting Agreement. Company shall use its commercially
reasonable efforts, on behalf of Parent, and pursuant to the request of Parent,
to cause certain officers and directors of Company to execute and deliver to
Parent a Stockholder Voting Agreement substantially in the form attached hereto
as Exhibit C and an Irrevocable Proxy substantially in the form of Attachment A
attached thereto concurrently with the execution of this Agreement.
5.9 FIRPTA. Company shall, on or prior to the Closing Date, provide Parent
with a properly executed FIRPTA Notification Letter, substantially in the form
attached hereto as Exhibit E, which states that shares of capital stock of
Company do not constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with
delivery of such Notification Letter, Company shall have provided to Parent, as
agent for Company, a form of notice to the Internal Revenue Service in
accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2)
and substantially in the form attached hereto as Exhibit F, along with written
authorization for Parent to deliver such notice form to the Internal Revenue
Service on behalf of Company upon the Closing of the Merger.
5.10 Legal Requirements. Each of Parent and, subject to Sections 4.3 and
5.1 of this Agreement, Company, shall take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other Person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.11 Employee Benefit Plans.
(a) Assumption of Company Options. At the Effective Time, the Company
Stock Option Plans will be assumed by Parent and each outstanding Company Option
to purchase shares of Company Common Stock under the Company Stock Option Plans,
whether vested or unvested, will be assumed by Parent and converted into an
option to purchase shares of Parent Common Stock (each a "Parent Option").
Schedule 5.11(a) hereto sets forth a true and complete list as of the date
hereof of all holders of outstanding Company Options under each of the Company
Stock Option Plans, including the number of shares of Company Capital Stock
subject to each such option, the exercise or vesting schedule, the exercise
price per share and the term of each such option. On the Closing Date, Company
shall deliver to Parent an updated Schedule 5.11(a) hereto current as of such
date. Except as provided below, each such Company Option so assumed by Parent
under this Agreement shall retain its respective vesting schedule under the
applicable Company Stock Option Plan and its respective stock option agreement
and each such Company Option shall continue to be subject to the terms and
conditions set forth in the applicable Company Stock Option Plan, except that
(i) each such option will be exercisable for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that would be issuable upon exercise of such option immediately
prior to the Effective Time, assuming that all vesting conditions applicable to
such option were then satisfied, multiplied by the Exchange Ratio and rounded
down to the nearest whole number of shares of Parent Common Stock, and (ii) the
per share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option will be equal to the quotient determined
by dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest tenth of a cent. Consistent with the terms of
the Company Stock Option Plans and the documents governing the outstanding
Company Options under such
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plans, the Merger will not terminate any of the outstanding Company Options
under the Company Stock Option Plans or accelerate the exercisability or vesting
of such options or the shares of Parent Common Stock which will be subject to
those options upon the assumption of the Company Options in connection with the
Merger. It is the intention of the parties that the Company Options assumed by
Parent qualify, to the maximum extent permissible, following the Effective Time,
as incentive stock options, as defined in Section 422 of the Code, to the
extent, and only to the extent, the Company Options so replaced qualified as
incentive stock options prior to the Effective Time. Parent shall use reasonable
best efforts, within thirty (30) days after the Form S-8 filed pursuant to
Section 5.13 hereof is declared effective, to issue to each Person who,
immediately prior to the Effective Time, was a holder of an outstanding Company
Option, a copy of the effective Form S-8 and such other documents as are
reasonably advisable, as evidence of the foregoing assumption of such Company
Options by Parent. The Company Board of Directors shall, to the extent
necessary, take appropriate action, prior to or as of the Effective Time, to
approve, for purposes of Section 16(b) of the Exchange Act, the deemed
disposition and cancellation of the Company Options in the Merger. Provided that
Company shall first provide to Parent the names of its stockholders and the
number of shares of Company Capital Stock or Company Options which may be
subject to Section 16(b) of the Exchange Act and any other information
reasonable requested by Parent and relating to the same, the Board of Directors
of Parent shall, prior to the Effective Time, take appropriate action to
approve, for purposes of Section 16(b) of the Exchange Act, the deemed grant of
options to purchase Parent Common Stock under the Company Options (as assumed
pursuant to this Section 5.11(a)). As of or prior to the Effective Time, the
disposition of shares of Company Common Stock by the Company executive officers
and Board members and the issuance of shares of Parent Common Stock to such
persons in the Merger shall also be included in the approval process of the
Boards of Directors of Company and Parent for purposes of Section 16(b) of the
Exchange Act.
(b) Company ESPP. The Company shall take all actions necessary to cause
all outstanding purchase rights under the Company ESPP to be exercised upon the
earlier of (i) the next scheduled purchase date under the Company ESPP, or (ii)
immediately prior to the Effective Time, and each participant in the Company
ESPP shall accordingly be issued shares of Company Common Stock at that time
which shall be converted into shares of Parent Common Stock in the Merger. The
Company shall take all actions necessary to terminate the Company ESPP as of
such exercise date, and no purchase rights shall be subsequently granted or
exercised under the Company ESPP. Employees of Company and other Members of the
Controlled Group who become employees of Parent or any of its subsidiaries as of
the Effective Time shall be permitted to participate in the Parent ESPP
commencing on the first enrollment date following the Effective Time, subject to
compliance with the eligibility provisions of such plan (with employees
receiving credit, for purposes of such eligibility provisions, for service with
the Company or any other Member of the Controlled Group to the extent permitted
by applicable law and applicable tax qualification requirements).
(c) Termination of Employee Plans. If requested by Parent, Company
shall, immediately prior to the Closing Date, terminate the Company Plans and no
further contributions shall be made to the Company Plans, provided that, as
conditions of such termination, (i) Company's employees who become employees of
Parent and/or the Surviving Corporation shall receive employee benefits which in
the aggregate are no less favorable than those provided from time to time by
Parent and its subsidiaries to their respective similarly situated employees;
and (ii) Company's employees shall be eligible to participate in Parent's 401(k)
plan immediately following the Closing Date, subject to compliance with the
eligibility provisions of such plan. Parent and/or Surviving Corporation shall
provide or cause to be provided that under each employee benefit plan, policy,
program or arrangement where service is relevant to a determination of an
employee's eligibility to participate, vesting, or level or amount of benefits,
employees of Company who become employees of Parent and/or the Surviving
Corporation shall be credited with their period of service with Company prior to
the Closing, to the extent permitted by applicable law and applicable tax
qualification requirements, and subject to any generally applicable break in
service or similar rules. Subject to the approval of any insurance carrier and
to the extent consistent with applicable law and applicable tax qualification
requirements, Parent and/or the Surviving Corporation shall make available, or
cause to be made available, to those employees of Company who become employees
of Parent and/or the
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Surviving Corporation, medical, dental, disability and other welfare benefits
plans and programs, to the extent the same is offered by Parent and/or the
Surviving Corporation generally to their respective employees, without regard to
any preexisting condition limitation, actively-at-work requirement or similar
limitation, provided, and only to the extent, that any analogous restriction
applied to such employee under an analogous plan of Company had been satisfied
as of the Closing Date. In determining an employee's share of the cost of
coverage under any plan or program of Parent and/or the Surviving Corporation
for the year in which the Closing occurs, Parent and/or the Surviving
Corporation shall make commercially reasonable efforts to credit the employee
with any pre-Closing co-pays and deductibles made by or on behalf of such
employee under each comparable plan maintained by Company prior to the Effective
Time for such year. Parent shall not be required to have any preexisting
condition limitation, actively-at-work requirement or similar limitation waived
or to credit any pre-Closing co-pays and deductibles made by or on behalf of
such employee unless Company (or its successor entity) or the applicable
insurance carrier makes available a HIPAA Certificate evidencing prior coverage
under the corresponding or analogous Company plan. Company shall provide to
Parent (i) executed resolutions by the Board of Directors of Company authorizing
the termination and (ii) an executed amendment to the Plans sufficient to assure
compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the Plan will be maintained at
the time of termination.
5.12 Indemnification.
(a) For not less than (i) six (6) years, in the case of acts or
omissions under or pursuant to Section 174 of the Delaware Law and Section 8109
of Title 10 of the Delaware Code Annotated, and (ii) four (4) years, for all
other acts or omissions, after the Effective Time, Parent will, and will cause
the Surviving Corporation to, indemnify and hold harmless the present and former
officers, directors, employees and agents of Company (the "Indemnified Parties")
in respect of acts or omissions occurring on or prior to the Effective Time to
the extent provided for under Company's Certificate of Incorporation and Bylaws
and each indemnification agreement with Company officers and directors to which
Company is a party, in each case in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. Without limitation of the foregoing, in the event any
such Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter relating to this
Agreement or the transactions contemplated hereby occurring on or prior to the
Effective Time, Parent shall cause the Surviving Corporation to pay as incurred
such Indemnified Party's reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith.
(b) For (i) six (6) years, in the case of acts or omissions under or
pursuant to Section 174 of the Delaware Law and Section 8109 of Title 10 of the
Delaware Code Annotated, and (ii) four (4) years, for all other acts or
omissions after the Effective Time, Parent will, and will cause the Surviving
Corporation to, use its best efforts to provide officers' and directors'
liability insurance in respect of acts or omissions occurring on or prior to the
Effective Time covering each such Person currently covered by Company's
officers' and directors' liability insurance policy on terms at least as
favorable as the coverage currently in effect on the date hereof, provided that
in satisfying its obligation under this Section 5.12(b), Parent shall not be
obligated to cause the Surviving Corporation to pay premiums in excess of 150%
of the amount per annum Company paid in its last full fiscal year, which amount
has been disclosed to Parent and if the Surviving Corporation is unable to
obtain the insurance required by this Section 5.12(b), it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
(c) For a period of (i) six (6) years, in the case of acts or omissions
under or pursuant to Section 174 of the Delaware Law and Section 8109 of Title
10 of the Delaware Code Annotated, and (ii) four (4) years, for all other acts
or omissions, after the Effective Time, to the extent there is any claim,
action, suit, proceeding or investigation (whether commencing before or after
the Effective Time) against or involving any Indemnified Party that arises out
of or pertains to any action or omission (or alleged action or omission) in his
or her capacity as a director, officer, employee, or agent of Company which act
omission occurred prior to the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, provide legal counsel and to defend such Indemnified
Party and to pay the reasonable fees
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and expenses of such counsel. Parent shall, and shall cause the Surviving
Corporation, to cooperate in the defense of any such matter; provided, however,
that neither the Surviving Corporation nor Parent shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld, conditioned or delayed); and provided, further, that, in
the event that any claim or claims for indemnification are asserted or made
within such four-year or six-year period, as applicable, all rights to
indemnification in respect to any such claim or claims shall continue until the
final disposition of any and all such claims.
(d) Parent shall pay all expenses, including reasonable attorneys' fees,
that may be incurred by any Indemnified Party in enforcing the indemnity and
other obligations provided for in this Section 5.12 to the extent that such
Indemnified Party is determined to be entitled to indemnification under this
Section 5.12.
(e) The provisions of this Section 5.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
5.13 Form S-8. Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon the exercise of the Company Options assumed in accordance with Section
5.11(a). As soon as practicable and in no event more than twenty (20) days after
the Closing, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate forms) with respect to the shares of Parent
Common Stock subject to such options or on another appropriate form of
registration statement for any such shares of Parent Common Stock which are not
registrable on Form S-8 and shall use its reasonable best efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. Company will cooperate and
assist Parent in the preparation of such registration statement(s).
5.14 NASDAQ Quotation. Parent and Company agree to continue the quotation
of Parent Common Stock and Company Common Stock, respectively, on the Nasdaq
National Market during the term of the Agreement so that, to the extent
necessary, appraisal rights will not be available to the stockholders of Company
under Section 262 of the Delaware Law.
5.15 Treatment as Reorganization. Neither Company nor Parent shall take
any action prior to or following the Closing that would cause the merger to fail
to qualify as a "reorganization" within the meaning of Section 368(a) of the
Code. Company and Parent shall cooperate in obtaining the opinions referred to
in Section 6.1(e) hereof, including providing counsel with the representation
letters also described in Section 6.1(e).
5.16 Takeover Statutes. If any Takeover Statute shall become applicable to
the transaction contemplated hereby, Company and the members of the Board of
Directors of Company shall grant such approvals and take such actions as are
necessary so that the Merger and the transactions contemplated hereby may be
commenced as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
in the transaction contemplated hereby, except, in each such case, to the extent
required in the exercise of the fiduciary duties of the Board of Directors of
Company under applicable law as advised by independent counsel.
5.17 Pooling Accounting. Parent and Company shall each use reasonable
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling-of-interests. Each of Parent and Company shall use
its reasonable efforts to cause its "Affiliates" (as defined in Section 5.7) not
to take any action that would adversely affect the ability of Parent to account
for the business combination to be effected by the Merger as a
pooling-of-interests.
5.18 Pooling Letters.
(a) Parent shall use all reasonable efforts to cause to be delivered to
Parent a letter of Ernst & Young LLP, Parent's independent accountants, dated
the Closing Date, to the effect that the Merger qualifies for
pooling-of-interests accounting treatment, if consummated in accordance with
this Agreement.
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Such letter shall be in a form reasonably satisfactory to Parent and customary
in scope and substance for letters delivered by independent public accountants
in connection with transactions of this type. Company shall provide appropriate
representations to Ernst & Young LLP as reasonably requested by Ernst & Young
LLP, customary in scope and substance for such letters.
(b) Company shall use all reasonable efforts to cause to be delivered to
Company a letter of Arthur Andersen LLP, Company's independent accountants,
dated the Closing Date, to the effect that Company is poolable in the
transactions contemplated in this Agreement, if consummated in accordance with
this Agreement. Such letter shall be in a form reasonably satisfactory to
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with transactions of this type.
Parent shall provide appropriate representations to Arthur Andersen LLP as
reasonably requested by Arthur Andersen LLP, customary in scope and substance
for such letters.
5.19 Notices. Company shall give all notices and other information
required to be given to the employees of Company, any collective bargaining unit
representing any group of employees of Company, if applicable, and any
applicable government authority under the WARN Act, the National Labor Relations
Act, the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the transactions provided for
in this Agreement.
5.20 Listing of Additional Shares. Parent shall, prior to the Effective
Time, cause all shares of Parent Common Stock to be issued pursuant to the terms
of this Agreement to be approved for listing on the Nasdaq National Market.
5.21 Further Assurances. Parent, Merger Sub and, subject to Sections 4.3
and 5.1 of this Agreement, Company, shall use commercially reasonable best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.22 Rights Agreement. If Company, after the date hereof, adopts or
implements any stockholder rights agreement or plan (the "Company Rights
Agreement"), Company shall take all necessary or advisable action to ensure that
neither the execution and delivery of this Agreement nor the performance by the
respective parties hereto of their obligations hereunder will give rise to a
"stock acquisition date" or "distribution date" or constitute Parent or Merger
Sub an "acquiring person," or like terms as defined in any such Company Rights
Agreement. Company shall take any further action necessary prior to the
Effective Time to cause the dilutive provisions of any such Company Rights
Agreement to be inapplicable to the Merger, without any payment to holders of
rights issued under any such Company Rights Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
No party may refuse to close if any condition remains unsatisfied where
such party's failure to fulfill its obligations under this Agreement shall have
been the cause of, or resulted in, the condition not being satisfied.
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Company stockholders.
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(b) Registration Statement. The SEC shall have declared the Registration
Statement effective in accordance with the provisions of the Securities Act, and
shall be effective at the Effective Time, and no stop order suspending
effectiveness of the Registration Statement shall have been issued, no action,
suit, proceedings or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (which has
jurisdiction over Company or Parent), seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal. In the event an injunction or other order
shall have been issued, each party agrees to use its reasonable efforts to have
such injunction or other order lifted.
(d) Governmental Approval. Parent, Merger Sub and Company shall have
timely obtained from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of or in connection with the Merger
and the several transactions contemplated hereby, including but not limited to
such approvals, waivers and consents as may be required under the Securities
Act, under state blue sky laws, and under HSR.
(e) Tax Opinion. Each of Parent and Company shall have received written
opinions of its respective legal counsel, in form and substance reasonably
satisfactory to Parent or Company, as the case may be, and dated on or about the
Closing Date to the effect that the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code and that each of Parent, Merger
Sub and Company is a "party to a reorganization" within the meaning of Section
368(b) of the Code, and such opinions shall not have been withdrawn; provided,
however, that if Company's legal counsel does not render such opinion, this
condition shall nevertheless be deemed satisfied with respect to Company if
Parent's legal counsel renders such opinion to Parent. The parties to this
Agreement agree to make such reasonable representations as requested by the
legal counsel of Parent and/ or Company for the purpose of rendering such
opinions and that such legal counsel are entitled to rely on such
representations, substantially in the form attached hereto as Exhibit G-1 and
Exhibit G-2.
6.2 Additional Conditions to Obligations of Company. The obligations of
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Company:
(a) Representations, Warranties and Covenants. Except as disclosed in
the Parent Disclosure Schedule dated the date of this Agreement, (i) the
representations and warranties of Parent in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time or, in the case
of representations and warranties of Parent which speak specifically as of an
earlier date, shall be true and correct as of such earlier date, except in each
case, (A) for changes contemplated by the Agreement, or (B) where the failure to
be true and correct has not had, and would not reasonably be expected to result
in, a Parent Material Adverse Effect and (ii) Parent shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by Parent as of the
Effective Time.
(b) Certificate of Parent. Company shall have been provided with a
certificate executed on behalf of Parent by an authorized officer to the effect
set forth in Section 6.2(a).
(c) Letter of Accountants. Company shall have received a letter from
Arthur Andersen LLP, Company's independent accountants, dated the Closing date,
to the effect that the Merger qualifies for pooling-of-interests accounting
treatment if consummated in accordance with this Agreement.
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6.3 Additional Conditions to the Obligations of Parent. The obligations of
Parent to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing, by
Parent:
(a) Representations, Warranties and Covenants. Except as disclosed in
the Company Disclosure Schedule dated the date of this Agreement, (i) the
representations and warranties of Company in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and or, in the
case of representations and warranties of Company which speak specifically as of
an earlier date, shall be true and correct as of such earlier date, except in
each case, (A) for changes contemplated by the Agreement, or (B) where the
failure to be true and correct has not had, and would not reasonably be expected
to result in, a Company Material Adverse Effect and (ii) Company shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it as of the Effective Time.
(b) Certificate of Company. Parent shall have been provided with a
certificate executed on behalf of Company by its President to the effect set
forth in Section 6.3(a).
(c) Affiliates Agreements. Parent shall have received from the
Affiliates of Company an executed Company Affiliates Agreement.
(d) Letter of Accountants. Parent shall have received a letter from
Ernst & Young, LLP, Parent's independent accountants, dated the Closing Date, to
the effect that the Merger qualifies for pooling-of-interests accounting
treatment if consummated in accordance with this Agreement.
(e) Company Expenses. In connection with this Agreement and the
transactions contemplated hereunder, Company shall not have incurred any
expenses, costs or other fees in excess of $725,000 for all legal, $100,000 for
all accountant fees and $3,500,000 for Banc of America Securities.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.
(a) At any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Company, this Agreement may be terminated:
(i) by mutual written consent duly authorized by each party's Board
of Directors;
(ii) by either Parent or Company, if the Closing shall not have
occurred on or before the date which is six months after the date hereof
(provided, a later date may be agreed upon in writing by the parties hereto, and
provided further that the right to terminate this Agreement under this Section
7.1(a)(ii) shall not be available to any party whose action or failure to act
has been the cause of the failure of the Merger to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement);
(iii) by Parent, if (A) Company shall materially breach any
representation, warranty, obligation or agreement hereunder (other than a breach
of Section 4.3(a) hereof which is specifically addressed in subsection (v) below
or a breach which has not had, and would not reasonably be expected to result
in, a Company Material Adverse Effect) and such breach shall not have been cured
within twenty (20) business days of receipt by Company of written notice of such
breach (describing the details of such breach) provided that the right to
terminate this Agreement by Parent under this Section 7.1(a)(iii)(A) shall not
be available to Parent where Parent is at that time in breach of this Agreement,
(B) the Board of Directors of Company shall have withdrawn or modified its
recommendation of this Agreement or the Merger in a manner adverse to Parent or
recommended, endorsed, accepted or
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agreed to a Takeover Proposal or shall have resolved to do any of the foregoing,
(C) the Board of Directors of Company shall have rejected a Takeover Proposal,
but failed to give Parent a written reaffirmation of its recommendation of this
Agreement, the Merger and the other transactions contemplated hereby within five
(5) business days following the rejection of such Takeover Proposal (the
"Reaffirmation"), (D) a Trigger Event is commenced (other than by Parent or an
Affiliate of Parent) and the Board of Directors of Company (x) recommends that
the stockholders of Company tender their shares in such tender or exchange
offer; or (y) within 5 days after such tender or exchange offer, fails to
recommend against acceptance of such offer or takes no position with respect to
the acceptance of such Trigger Event and fails to deliver to Parent a
Reaffirmation; or (E) for any reason (other than as the result of the failure of
Parent to satisfy the conditions specified in Sections 6.1 or 6.2(a)), Company
fails to call and hold the Company Stockholders Meeting by March 15, 2000;
(iv) by Company, if (A) Parent shall materially breach any
representation, warranty, obligation or agreement hereunder (other than a breach
which has not had, and would not reasonably be expected to result in, a Parent
Material Adverse Effect) and such breach shall not have been cured within twenty
(20) business days of receipt by Parent of written notice of such breach
(describing the details of such breach) provided that the right to terminate
this Agreement by Company under this Section 7.1(a)(iv)(A) shall not be
available to Company where Company is at that time in breach of this Agreement,
or (B) the Board of Directors of Company shall recommend, endorse, accept or
agree to a Superior Proposal or shall have resolved to recommend, endorse,
accept or agree to a Superior Proposal;
(v) by Parent if Company or any of its subsidiaries or their
respective officers, directors, employees or representatives have materially
breached or violated the restrictions of Section 4.3(a) hereof; or
(vi) by either Parent or Company if (A) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable, or (B) if any required
approval of the stockholders of Company shall not have been obtained by reason
of the failure to obtain the required vote upon a vote held at a duly held
meeting of stockholders or at any adjournment thereof.
(b) As used herein, a "Trigger Event" shall occur if any Person acquires
securities representing thirty percent (30%) or more, or commences a tender or
exchange offer following the successful consummation of which the offeror and
its affiliate would beneficially own securities representing thirty percent
(30%) or more, of the voting power of Company.
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part, of Parent, Merger Sub or
Company or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties or covenants set forth in
this Agreement; provided that, notwithstanding the above, the provisions of
Section 5.4 (Confidentiality), this Section 7.2 and Section 7.3 (Expenses and
Termination Fees) shall remain in full force and effect and survive any
termination of this Agreement and Parent's right to a remedy for Company's
breach of Section 4.3 shall survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c) and (d) of this Section 7.3 and
Section 6.3(o), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense.
(b) In the event that (i) Parent shall terminate this Agreement pursuant
to Section 7.1(a)(v), (ii) either Parent or Company shall terminate this
Agreement pursuant to Section 7.1(a)(vi)(B) following a failure of the
stockholders of Company to approve this Agreement and, prior to the time of the
meeting of Company's stockholders, there shall have been (A) a Trigger Event
with respect to Company
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or (B) a Takeover Proposal with respect to Company which shall not have been (x)
rejected by Company with delivery of a Reaffirmation to Parent and (y) withdrawn
by the third party, (iii) Parent shall terminate this Agreement pursuant to
Section 7.1(a)(iii)(B)(C) or (D), or (iv) Company shall terminate this Agreement
pursuant to Section 7.1(a)(iv)(B), then Company shall promptly, but in no event
later than fifteen business days after such termination, pay to Parent 3% of the
value of Parent Common Stock that would have been issued in the Merger as of the
date of termination of this Agreement in cash (the "Termination Fee"); such
Termination Fee to be determined by the following formula: Termination Fee = ((A
x B) x C) x 3%; where A equals the sum of Company Capital Stock outstanding as
of the date of the termination, plus all shares of Company Capital Stock subject
to Company Options outstanding as of the date of the termination, plus Company
Convertible Securities outstanding as of the date of termination, if any; B
equals the Exchange Ratio and C equals the average of the closing prices of
Parent Common Stock for the twenty (20) days ending one day prior to the
termination date; provided, however, that with respect to Section 7.3(b)(ii)(A)
and Section 7.3(b)(iii)(A), a Trigger Event shall not be deemed to include the
acquisition by any Person of securities representing thirty percent (30%) or
more of Company if such Person has acquired such securities not with the purpose
nor with the effect of changing or influencing the control of Company, nor in
connection with or as a participant in any transaction having such purpose or
effect, including without limitation not in connection with such Person (i)
making any public announcement with respect to the voting of such shares at any
meeting to consider any merger, consolidation, sale of substantial assets or
other business combination or extraordinary transaction involving Company, (ii)
making, or in any way participating in, any "solicitation" of "proxies" (as such
terms are defined or used in Regulation 14A under the Exchange Act) to vote any
voting securities of Company (including, without limitation, any such
solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to advise
or influence any Person with respect to the voting of any voting securities of
Company, (iii) forming, joining or in any way participating in any "group"
within the meaning of Section 13(d)(3) of the Exchange Act with respect to any
voting securities of Company or (iv) otherwise acting, alone or in concert with
others, to seek control of Company or to seek to control or influence the
management or policies of Company.
(c) In the event that Parent shall terminate this Agreement pursuant to
Section 7.1(a)(iii)(A), Company shall promptly reimburse Parent for all of the
actual, documented, reasonable out-of-pocket costs and expenses incurred by
Parent in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its outside
advisors, outside accountants and outside legal counsel).
(d) In the event that Company shall terminate this Agreement pursuant to
Section 7.1(a)(iv)(A), Parent shall promptly reimburse Company for all of the
actual, documented and reasonable out-of-pocket costs and expenses incurred by
Company in connection with this Agreement and the transactions contemplated
hereby (including without limitation the fees and expenses of its outside
advisors, outside accountants and outside legal counsel).
(e) In the event that either Company's or Parent's accountants determine
that their respective client is not poolable, and such non-poolable party shall
terminate this Agreement or otherwise determine not to close the transactions
contemplated thereby, such non-poolable party shall promptly reimburse the other
party for all of the actual, documented and reasonable out-of-pocket costs and
expenses incurred by such party in connection with this Agreement and the
transactions contemplated hereby (including without limitation the fees and
expenses of its outside advisors, outside accountants and outside legal
counsel).
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Company shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the Company Capital Stock, (ii) alter or change any
term of the Articles of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and conditions
of the Agreement, if such alteration or change would materially adversely affect
the holders of Company Capital Stock.
A-38
<PAGE> 138
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of the other
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party granting such waiver or extension.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.4
(Confidentiality), Section 5.11 (Employee Benefit Plans), Section 5.12
(Indemnification), Section 5.13 (Form S-8), Section 5.21 (Best Efforts and
Further Assurances), Section 7.3 (Expenses and Termination Fees), Section 7.4
(Amendment), and this Article VIII shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, to:
Novellus Systems, Inc.
4000 N. First Street
San Jose, CA 95134
Attention: Robert H. Smith
Facsimile No.: (408) 943-3448
Telephone No.: (408) 943-9700
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304-1018
Attention: Richard Scudellari, Esq.
Facsimile No.: (650) 494-0792
Telephone No.: (650) 813-5880
(b) if to Company, to:
GaSonics International Corporation
2730 Junction Avenue
San Jose, CA 95314
Attn: Asuri Raghavan, President
Facsimile No.: (408) 570-7612
Telephone No.: (408) 570-7000
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place, 2200 Geng Road
Palo Alto, CA 94303
Attention: Rod J. Howard, Esq.
Timothy R. Curry, Esq.
Telephone: (650) 424-0160
Facsimile: (650) 496-2885
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<PAGE> 139
8.3 Interpretation; Certain Definitions. When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the Execution Date. The term
"Person" shall mean any corporation, partnership, individual, trust,
unincorporated association or other entity or Group (within the meaning of
Section 13(d)(3) of the Exchange Act). The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.4 Counterparts; Facsimile Delivery. This Agreement may be executed in
one or more counterparts and delivered by facsimile, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms, (b) are not intended to confer upon any
other Person any rights or remedies hereunder, except as set forth in Sections
1.6(a), (b) and (d) - (f), 1.7, 1.9, 1.10, 5.11, 5.12 and 5.13. and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided.
8.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Delaware without reference to such state's
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the jurisdiction of any court located within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process. THE PARTIES HERETO
IRREVOCABLY WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY ACTIONS,
SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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<PAGE> 140
8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
8.11 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a sum for its
attorneys' fees and all other costs and expenses incurred in such action or
suit.
[Signatures Follow on a Separate Page]
A-41
<PAGE> 141
IN WITNESS WHEREOF, Company, Parent and Merger Sub have each caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
"Company"
GASONICS INTERNATIONAL CORPORATION
By: /s/ ASURI RAGHAVAN
--------------------------------------
Name: Asuri Raghavan
Title: President
"Parent"
NOVELLUS SYSTEMS, INC.
By: /s/ RICHARD HILL
--------------------------------------
Name: Richard Hill
Title: President
"Merger Sub"
NEPTUNE ACQUISITION-SUB, INC.
By: /s/ ROBERT H. SMITH
--------------------------------------
Name: Robert H. Smith
Title: President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
A-42
<PAGE> 142
ANNEX B
OPINION OF BANC OF AMERICA SECURITIES LLC
DATED OCTOBER 25, 2000
<PAGE> 143
[LETTERHEAD OF BANC OF AMERICA SECURITIES LLC]
October 25, 2000
Board of Directors
GaSonics International Corporation
2730 Junction Avenue
San Jose, CA 95134
Members of the Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of GaSonics International Corporation (the "Company"),
of the Exchange Ratio (as defined below) provided for in connection with the
proposed merger (the "Merger") of the Company with Novellus Systems Inc. (the
"Purchaser"). Pursuant to the terms of the October 23, 2000 draft of an
Agreement and Plan of Reorganization, as modified in certain respects of which
BAS was informed by counsel to the Company on October 25, 2000 (the
"Agreement"), to be entered into by and among the Company, the Purchaser, and
Neptune Acquisition-Sub, Inc. (the "Merger Sub"), at the effective time of the
Merger, Merger Sub will be merged with and into the Company and the Company will
become a wholly owned subsidiary of the Purchaser. The stockholders of the
Company will receive for each share of Common Stock, par value $0.001 per share,
of the Company (the "Company Common Stock"), held by them, other than shares
held in treasury or held by the Purchaser or any affiliate of the Purchaser,
consideration equal to 0.52 shares (the "Exchange Ratio") of Common Stock, no
par value, of the Purchaser (the "Purchaser Common Stock"). You have informed
us, and we have assumed, that the Merger will be accounted for as a pooling of
interests in accordance with U.S. Generally Accepted Accounting Principles and
that the Merger will be treated as a tax-free reorganization and/or exchange,
each pursuant to the Internal Revenue Code of 1986, as amended. The terms and
conditions of the Merger are more fully set out in the Agreement.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company and the Purchaser,
respectively;
(ii) discussed the past and current operations, financial condition
and prospects of the Company with senior executives of the Company;
(iii) discussed with senior executives of the Company certain
financial forecasts prepared by the management of the Company;
(iv) reviewed and considered in the analysis forecasts of the
estimated financial performance of the Company published by investment
banking firms that provide research coverage of the Company;
(v) discussed with senior executives of the Company information
relating to certain strategic, financial and operational benefits
anticipated from the Merger;
(vi) reviewed the pro forma, impact of the Merger on the Purchaser's
earnings per share, cash flow, consolidated capitalization and financial
ratios;
(vii) reviewed information prepared by members of senior management of
the Company relating to the relative contributions of the Company and the
Purchaser to the combined company;
(viii) reviewed the reported prices and trading activity for the
Company Common Stock and the Purchaser Common Stock;
(ix) compared the financial performance of the Company and the
Purchaser and the prices and trading activity of the Company Common Stock
and the Purchaser Common Stock with that of certain other publicly traded
companies we deemed relevant;
B-1
<PAGE> 144
(x) compared the financial terms of the Merger to corresponding
financial terms, to the extent publicly available, of certain other
business combination transactions we deemed relevant;
(xi) participated in discussions among representatives of the Company
and the Purchaser and their financial and legal advisors;
(xii) reviewed the Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information reviewed by us
for the purposes of this opinion. With respect to the financial forecasts,
including information relating to certain strategic, financial and operational
benefits anticipated from the Merger, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and good faith judgments of the future performance of the Company and the
Purchaser. We discussed the forecasts published by investment banking firms with
members of management of the Company and they acknowledged our use of the
forecasts in arriving at our opinion. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals.
We have assumed that the definitive agreement for the Merger will be the
same as the Agreement, and that the Merger will be consummated as contemplated
in the Agreement, with full satisfaction of all covenants and conditions and
without any waivers. We were not requested to and did not provide advice
concerning the structure, the specific amount of the consideration, or any other
aspect of the Merger or the transactions contemplated by the Agreement (the
"Transactions"), or to provide services other than the delivery of this opinion.
We were not requested to and did not solicit any expressions of interest from
any other parties with respect to the sale of all or any part of the Company or
any other alternative transaction. We did not participate in negotiations with
respect to the terms of the Transactions. Consequently, we have assumed that
such terms are the most beneficial terms from the Company's perspective that
could under the circumstances be negotiated among the parties to the
Transactions, and no opinion is expressed as to whether any alternative
transaction might produce consideration for the Company's stockholders in an
amount in excess of that contemplated in the Merger.
We have acted as sole financial advisor to the Board of Directors of the
Company in connection with the Merger and will receive a fee for our services,
including a fee which is contingent upon the consummation of the Merger. In the
past, Banc of America Securities LLC or its affiliates have provided financial
advisory and financing services for the Company and the Purchaser and have
received fees for rendering these services. In the ordinary course of our
business, we and our affiliates may actively trade the debt and equity
securities of the Company and the Purchaser for our own account or for the
accounts of customers and, accordingly, we or our affiliates may at any time
hold long or short positions in such securities.
It is understood that this opinion is for the sole benefit and use of the
Board of Directors of the Company in connection with and for purposes of its
evaluation of the Merger and is not on behalf of, and shall not confer rights or
remedies upon, any person other than the Board of Directors. This opinion may
not be disclosed, referred to, or communicated (in whole or in part) to any
third party for any purpose whatsoever except with our prior written consent in
each instance. However, this opinion may be included in its entirety in any
filing made by the Company in respect of the Merger with the Securities and
Exchange Commission, so long as this opinion is reproduced in such filing in
full and any description of or reference to us or summary of this opinion and
the related analysis in such filing is in a form acceptable to us and our
counsel. In furnishing this opinion, we do not admit that we are experts within
the meaning of the term "experts" as used in the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, nor do we admit that this opinion constitutes a report or valuation
within the meaning of Section 11 of the Securities Act. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the
B-2
<PAGE> 145
date hereof. It should be understood that subsequent developments may affect
this opinion and we do not have any obligation to update, revise, or reaffirm
this opinion. This opinion does not in any manner address the prices at which
the Purchaser Common Stock will trade following consummation of the Merger. In
addition, we express no opinion or recommendation as to how the stockholders of
the Company and the Purchaser should vote at the stockholders' meeting held in
connection with the Merger.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, we are of the opinion on the date hereof that
the Exchange Ratio in the proposed Merger is fair from a financial point of view
to the Company's stockholders.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
/s/ Barry Newman
----------------------------------
Name: Barry Newman
Title: Managing Director
B-3
<PAGE> 146
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification, including
reimbursement of expenses incurred, under certain circumstances for liabilities
arising under the Securities Act. Novellus' Amended and Restated Articles of
Incorporation and Novellus' Amended Bylaws provide for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by California law. In addition, Novellus has entered into indemnification
agreements with each of its directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) Opinion of Banc of America Securities LLC, attached as Annex B to the
proxy statement-prospectus which is part of this registration statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, as amended (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(2) That before any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, the issuer undertakes
that such reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form;
(3) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means, including information contained in documents filed after the
effective date of the registration statement through the date of responding
to such request; and
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this registration statement
when it became effective.
II-1
<PAGE> 147
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. If a claim of indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in a successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
[Signature Page Follows]
II-2
<PAGE> 148
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, State of California, on this 20th day of November, 2000.
NOVELLUS SYSTEMS, INC.
By: /s/ RICHARD S. HILL
------------------------------------
Richard S. Hill
President, Chief Executive Officer
and
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose signature
appears below constitutes and appoints Richard S. Hill and Robert H. Smith and
each of them acting individually, as such person's attorneys-in-fact and agents,
each with the power of substitution, for such person in any and all capacities,
to sign any amendments to this Registration Statement on Form S-4 (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following persons
on behalf of the Registrant and in the capacities indicated on November 20,
2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ RICHARD S. HILL President, Chief Executive November 20, 2000
----------------------------------------------------- Officer and Chairman of the
Richard S. Hill Board of Directors
(Principal Executive
Officer)
/s/ ROBERT H. SMITH Executive Vice President, November 20, 2000
----------------------------------------------------- Finance and Administration,
Robert H. Smith Chief Financial Officer,
Secretary and Director
(Principal Financial
Officer)
/s/ KEVIN S. ROYAL Corporate Controller November 20, 2000
----------------------------------------------------- (Principal Accounting
Kevin S. Royal Officer)
/s/ D. JAMES GUZY Director November 20, 2000
-----------------------------------------------------
D. James Guzy
/s/ J. DAVID LITSTER Director November 20, 2000
-----------------------------------------------------
J. David Litster
</TABLE>
II-3
<PAGE> 149
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ TOM LONG Director November 20, 2000
-----------------------------------------------------
Tom Long
/s/ GLEN POSSLEY Director November 20, 2000
-----------------------------------------------------
Glen Possley
/s/ WILLIAM R. SPIVEY Director November 20, 2000
-----------------------------------------------------
William R. Spivey
</TABLE>
II-4
<PAGE> 150
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of October
25, 2000, by and among Registrant, Neptune Acquisition-Sub,
Inc. and GaSonics International Corporation (included as
Annex A to the proxy statement-prospectus filed as part of
this Registration Statement).
3.1 Amended and Restated Articles of Incorporation of Registrant
(incorporated by reference to Exhibit 3.1 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999).
3.2 Amended Bylaws of Registrant (incorporated by reference to
Exhibit 3.2 to Registrant's Registration Statement on Form
S-1, File No. 33-23011, which was declared effective on
August 11,1988).
3.2.1 Section 2.5 of Registrant's Bylaws, as amended in 1995,
regarding election and term of office of directors
(incorporated by reference to Exhibit 3.2.1 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997).
3.2.2 Section 2.2 of Registrant's bylaws, as amended in 1997,
regarding the number of directors (incorporated by reference
to Exhibit 3.2.2 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997).
3.2.3 Article X, Section 10.4 of Registrant's bylaws, as amended
in 1999, regarding notice of shareholder meetings.
5.1* Opinion of Morrison & Foerster LLP, together with consent.
8.1* Tax Opinion of Morrison & Foerster LLP, together with
consent.
8.2* Tax Opinion of Brobeck, Phleger & Harrison LLP, together
with consent.
23.1 Consent of Arthur Andersen LLP, independent public
accountants with respect to GaSonics' financial statements.
23.2 Consent of Ernst & Young LLP, independent auditors with
respect to Novellus' financial statements.
23.3* Consent of Morrison & Foerster LLP (included as part of its
opinions filed as Exhibits 5.1 and 8.1).
23.4* Consent of Brobeck, Phleger & Harrison LLP (included as part
of its opinion filed as Exhibit 8.2).
24.1 Power of Attorney (See Page II-3).
99.1 Form of Proxy of GaSonics International Corporation.
99.2 Consent of Banc of America Securities LLC.
</TABLE>
-------------------------
* To be filed by amendment.
